Adaptation investments and homeownership
This article develops a model where ownership improves the efficiency of the housing market as it enhances the utility of housing consumption for some consumers. The model is based on an extended Hotelling-Lancaster utility approach in which the ideal variant of housing is obtainable only by adapting the home through a supplementary investment. Ownership offers low costs of adaptation, but has high contract costs compared with renting. Consumers simultaneously choose housing demand and tenure, and because of the different cost structure only consumers with strong preferences for individual adaptation of the home choose ownership. This article analyses the consumer's optimization. The model provides an explanation for the observation that homeowners typically live in larger dwelling units than tenants. It also provides an explanation for a high price of housing services tending to reduce homeownership rates.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ortalo-Magne, Francois & Rady, Sven, 2002. "Tenure choice and the riskiness of non-housing consumption," Journal of Housing Economics, Elsevier, vol. 11(3), pages 266-279, September.
- Hans-Werner Sinn, 2000.
"EU Enlargement, Migration, and Lessons from German Unification,"
German Economic Review,
Verein für Socialpolitik, vol. 1(3), pages 299-314, 08.
- Sinn, Hans-Werner, 1999. "EU Enlargement, Migration and Lessons from German Unification," CEPR Discussion Papers 2174, C.E.P.R. Discussion Papers.
- Hans-Werner Sinn, 1999. "EU Enlargement, Migration, and Lessons from German Unification," CESifo Working Paper Series 182, CESifo Group Munich.
- Black, Dan & Gates, Gary & Sanders, Seth & Taylor, Lowell, 2002. "Why Do Gay Men Live in San Francisco?," Journal of Urban Economics, Elsevier, vol. 51(1), pages 54-76, January.
- Smith, Lawrence B & Rosen, Kenneth T & Fallis, George, 1988. "Recent Developments in Economic Models of Housing Markets," Journal of Economic Literature, American Economic Association, vol. 26(1), pages 29-64, March.
- Henderson, J Vernon & Ioannides, Yannis M, 1983. "A Model of Housing Tenure Choice," American Economic Review, American Economic Association, vol. 73(1), pages 98-113, March.
- Swan, Craig, 1984. "A model of rental and owner-occupied housing," Journal of Urban Economics, Elsevier, vol. 16(3), pages 297-316, November. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:jhouse:v:17:y:2008:i:1:p:102-115. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.