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Low Homeownership in Germany - A Quantitative Exploration

Author

Listed:
  • Leo Kaas
  • Georgi Kocharkov
  • Edgar Preugschat
  • Nawid Siassi

Abstract

The homeownership rate in Germany is one of the lowest among advanced economies. To better understand this fact, we analyze the role of three specific policies which discourage homeownership in Germany: an extensive social housing sector with broad eligibility criteria, high transfer taxes when buying real estate, and no tax deductions for mortgage interest payments by owner-occupiers. We build a lifecycle model with uninsurable income risk and endogenous homeownership in order to quantify the policy effects on homeownership and welfare. We find that all three policies have sizable effects on the homeownership rate. At the same time, household welfare would be reduced by moving to a policy regime with low transfer taxes and mortgage interest tax deductions, but it would improve in the absence of social housing, in particular when coupled with housing subsidies for low-income households.

Suggested Citation

  • Leo Kaas & Georgi Kocharkov & Edgar Preugschat & Nawid Siassi, 2017. "Low Homeownership in Germany - A Quantitative Exploration," CESifo Working Paper Series 6775, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_6775
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp6775.pdf
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    References listed on IDEAS

    as
    1. Kunka Petkova & Alfons J. Weichenrieder, 2017. "Price and Quantity Effects of the German Real Estate Transfer Tax," CESifo Working Paper Series 6538, CESifo Group Munich.
    2. repec:red:issued:16-340 is not listed on IDEAS
    3. Cho, Sang-Wook (Stanley), 2012. "Accounting For Life-Cycle Wealth Accumulation: The Role Of Housing Institution," Macroeconomic Dynamics, Cambridge University Press, vol. 16(04), pages 493-517, September.
    4. Jonathan Gruber & Amalie Jensen & Henrik Kleven, 2017. "Do People Respond to the Mortage Interest Deduction? Quasi-Experimental Evidence from Denmark," NBER Working Papers 23600, National Bureau of Economic Research, Inc.
    5. Jonathan Halket & Santhanagopalan Vasudev, 2014. "Saving Up or Settling Down: Home Ownership over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 345-366, April.
    6. Dietz, Robert D. & Haurin, Donald R., 2003. "The social and private micro-level consequences of homeownership," Journal of Urban Economics, Elsevier, vol. 54(3), pages 401-450, November.
    7. Alena Bicakova & Eva M. Sierminska, 2008. "Mortgage Market Maturity and Homeownership Inequality among Young Households: A Five-Country Perspective," SOEPpapers on Multidisciplinary Panel Data Research 90, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. Patrick Bajari & Phoebe Chan & Dirk Krueger & Daniel Miller, 2013. "A Dynamic Model Of Housing Demand: Estimation And Policy Implications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 409-442, May.
    9. Mariacristina De Nardi & Giulio Fella, 2017. "Saving and Wealth Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 26, pages 280-300, October.
    10. Floetotto, Max & Kirker, Michael & Stroebel, Johannes, 2016. "Government intervention in the housing market: Who wins, who loses?," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 106-123.
    11. Christian A. L. Hilber & Tracy M. Turner, 2014. "The Mortgage Interest Deduction and its Impact on Homeownership Decisions," The Review of Economics and Statistics, MIT Press, vol. 96(4), pages 618-637, October.
    12. Dan Andrews & Aida Caldera Sánchez, 2011. "The Evolution of Homeownership Rates in Selected OECD Countries: Demographic and Public Policy Influences," OECD Journal: Economic Studies, OECD Publishing, vol. 2011(1), pages 1-37.
    13. Mariacristina De Nardi & Giulio Fella & Gonzalo Paz Pardo, 2016. "The Implications of Richer Earnings Dynamics for Consumption and Wealth," NBER Working Papers 21917, National Bureau of Economic Research, Inc.
    14. Olsen, Edgar O. & Zabel, Jeffrey E., 2015. "US Housing Policy," Handbook of Regional and Urban Economics, Elsevier.
    15. Cho, Sang-Wook (Stanley) & Francis, Johanna L., 2011. "Tax treatment of owner occupied housing and wealth inequality," Journal of Macroeconomics, Elsevier, vol. 33(1), pages 42-60, March.
    16. Leo Kaas & Georgi Kocharkov & Edgar Preugschat, 2015. "Wealth Inequality and Homeownership in Europe," Working Paper Series of the Department of Economics, University of Konstanz 2015-18, Department of Economics, University of Konstanz.
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    Citations

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    Cited by:

    1. Hintermaier, Thomas & Koeniger, Winfried, 2018. "Differences in Euro-Area Household Finances and their Relevance for Monetary-Policy Transmission," Economics Working Paper Series 1806, University of St. Gallen, School of Economics and Political Science.
    2. Petkova, Kunka & Weichenrieder, Alfons, 2017. "Price and Quantity Effects of the German Real Estate Transfer Tax," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168305, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    homeownership; housing markets;

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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