A Simple Model of Housing Rental and Ownership with Policy Simulations
AbstractThe housing market is both large and complex. 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. Increases in the stock of housing would reduce rents and house prices. A reduction in tax concessions for landlords would raise rents and moderate house prices. Additional subsidies for owner-occupancy would tend to reduce rents and raise house prices. Significant reductions in rents and house prices would follow a fall in the cost of housing, through, for example lower regulatory and consent costs. Falling real interest rates result in lower rents, higher house prices and lower owner-occupancy rates. Despite the widespread attention owner-occupancy rates have attracted, the paper concludes that 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 InfoPaper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 09/05.
Date of creation: Dec 2009
Date of revision:
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Housing markets; New Zealand; rental and owner-occupancy; elasticities; rents; house prices; policy simulations;
Find related papers by JEL classification:
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Housing Supply and Markets
- R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Government Policy; Regulatory Policy
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