Template-Type: ReDIF-Paper 1.0
Author-Name: Allen Head
Author-X-Name-First: Allen
Author-X-Name-Last: Head
Author-Email: heada@econ.queensu.ca
Author-Workplace-Name: Department of Economics, Queen's University, Kingston, Canada
Author-Name: Huw Lloyd-Ellis
Author-X-Name-First: Huw
Author-X-Name-Last: Lloyd-Ellis
Author-Email: lloydell@econ.queensu.ca
Author-Workplace-Name: Department of Economics, Queen's University, Kingston, Canada
Author-Name: Derek Stacey
Author-X-Name-First: Derek
Author-X-Name-Last: Stacey
Author-Email: dstacey@economics.ryerson.ca
Author-Workplace-Name: Department of Economics, Ryerson University, Toronto, Canada
Title: Heterogeneity, Frictional Assignment and Home-Ownership
Abstract: A model of the distribution of home-ownership in a city is developed. Heterogeneous houses are built by a competitive development industry and either rented competitively or sold through directed search to households which differ in wealth and sort over housing types. In the absence of both financial restrictions and constraints on house characteristics, higher income households are more likely to own and lower quality housing is more likely to be rented. Calibrated to match average features of housing markets within U.S. cities, the model is qualitatively consistent with U.S. data on the relationships between observed differences in median income, inequality, median household age, and construction/land costs across cities and both home-ownership and the average cost of owning vs. renting. Policies designed to improve housing affordability raise both housing quality and ownership for lower income households while lowering housing quality (but not ownership) for high income ones.
Classification-JEL: E30; R31; R10
Keywords: House Prices, Liquidity, Search, Income Inequality
Length: 57 pages
Creation-Date: 2018-01
Revision-Date: 2018-10
Number: 070
File-URL: http://economics.ryerson.ca/workingpapers/wp070.pdf
File-Format: Application/pdf
Handle: RePEc:rye:wpaper:wp070