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A Simple Model of Housing Rental and Ownership with Policy Simulations

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  • Andrew Coleman

    ()
    (Motu Economic and Public Policy Research)

  • Grant Scobie

    ()
    (NZ Treasury)

Abstract

This paper develops a simple model that captures the essential features of the supply and demand for housing, and which is used to evaluate the impact of a range of policy interventions. The model incorporates functions describing the demand to rent or purchase housing, a function describing the supply of rental housing, and a function describing the supply of new houses. The model is used to explore the effects on prices, quantities, and owner occupancy (homeownership) rates of policies that change the stock of housing, that alter the taxes and subsidies facing landlords and homeowners, that alter the cost of new housing, and that alter real interest rates. The results suggest that despite the widespread attention owner occupancy rates have attracted, they are not a particularly helpful guide to the state of the housing market. Typically they are quite insensitive to policy interventions, a result that follows from the integrated view of both the rental and ownership market, adopted in this study.

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Bibliographic Info

Paper provided by Motu Economic and Public Policy Research in its series Working Papers with number 09_08.

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Length: 44 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:mtu:wpaper:09_08

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Related research

Keywords: Housing markets; New Zealand; rental and owner occupancy; elasticities; rents; house prices; policy simulations;

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References

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  1. Nathalie Girouard & Mike Kennedy & Christophe André, 2006. "Has the Rise in Debt Made Households More Vulnerable?," OECD Economics Department Working Papers 535, OECD Publishing.
  2. Arthur Grimes & Andrew Aitken, 2006. "Housing Supply and Price Adjustment," Working Papers 06_01, Motu Economic and Public Policy Research.
  3. Peter Abelson & Roselyn Joyeux, 2007. "Price And Efficiency Effects Of Taxes And Subsidies For Australian Housing," Economic Papers, The Economic Society of Australia, vol. 26(2), pages 147-169, 06.
  4. Hwang, Min & Quigley, John M., 2010. "Housing Price Dynamics in Time and Space: Predictability, Liquidity and Investor Returns," Berkeley Program on Housing and Urban Policy, Working Paper Series qt41k6c76w, Berkeley Program on Housing and Urban Policy.
  5. Mark van Zijll de Jong & Grant M. Scobie, 2006. "Housing: An Analysis of Ownership and Investment Based on the Household Savings Survey," Treasury Working Paper Series 06/07, New Zealand Treasury.
  6. Andrew Coleman & John Landon-Lane, 2007. "Housing Markets and Migration in New Zealand, 1962-2006," Reserve Bank of New Zealand Discussion Paper Series DP2007/12, Reserve Bank of New Zealand.
  7. Borsch-Supan, Axel, 1986. "Household formation, housing prices, and public policy impacts," Journal of Public Economics, Elsevier, vol. 30(2), pages 145-164, July.
  8. Arthur Grimes & Andrew Aitken, 2004. "What's the Beef with House Prices? Economic Shocks and Local Housing Markets," Working Papers 04_08, Motu Economic and Public Policy Research.
  9. Geoffrey Meen & Mark Andrew, 2008. "Planning for housing in the post-Barker era: affordability, household formation, and tenure choice," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 79-98, spring.
  10. Donald R. Haurin & Patric H. Hendershott & Susan M. Wachter, 1996. "Borrowing Constraints and the Tenure Choice of Young Households," NBER Working Papers 5630, National Bureau of Economic Research, Inc.
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Cited by:
  1. Arthur Grimes & Sean Hyland & Andrew Coleman & James Kerr & Alex Collier, 2013. "A New Zealand Regional Housing Model," Working Papers 13_02, Motu Economic and Public Policy Research.

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