IDEAS home Printed from https://ideas.repec.org/p/cpb/discus/449.html
   My bibliography  Save this paper

Mortgage Debt Limits and Buy-to-Let Investors: A Structural Model of Housing with an Endogenous Rental Sector

Author

Listed:
  • Jurre Thiel

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Henrik Zaunbrecher

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

Since the financial crisis, home ownership rates have decreased across the world. Also in the Netherlands, the size of the rental sector has increased. Decreased access to mortgage debt explains part of this development. We show that tightened mortgage debt limits explain a fifth of the increase in rentals between 2013 and 2019. Mortgage debt limits constrain the amount a household can borrow to purchase a home. When a household cannot buy a house, it might rent instead. As a result, investors purchase homes to let and houses shift into the rental sector. Based on a new model of the interaction between the owner-occupied and rental sectors of the housing market, we show that this distortion can be sizable. Taxing rents or imposing a cap on the number of rentals can partially counteract the effects of mortgage debt limits on the number of rentals. However, such measures tend to also push households that prefer to rent into owner-occupation. Hence, they are counterproductive when taken too far.

Suggested Citation

  • Jurre Thiel & Henrik Zaunbrecher, 2023. "Mortgage Debt Limits and Buy-to-Let Investors: A Structural Model of Housing with an Endogenous Rental Sector," CPB Discussion Paper 449, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:449
    DOI: 10.34932/wfaj-zs98
    as

    Download full text from publisher

    File URL: https://www.cpb.nl/system/files/cpbmedia/omnidownload/CPB-Discussion-Paper-449-Mortgage-Debt-Limits-and-Buy-to-Let-Investors-A-Structural-Model-of-Housing.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.34932/wfaj-zs98?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Denis Chetverikov & Dongwoo Kim & Daniel Wilhelm, 2018. "Nonparametric instrumental-variable estimation," Stata Journal, StataCorp LLC, vol. 18(4), pages 937-950, December.
    2. Philippe Bracke, 2015. "House Prices and Rents: Microevidence from a Matched Data Set in Central London," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 403-431, June.
    3. Linneman, Peter, 1985. "An economic analysis of the homeownership decision," Journal of Urban Economics, Elsevier, vol. 17(2), pages 230-246, March.
    4. James Mills & Raven Molloy & Rebecca Zarutskie, 2019. "Large‐Scale Buy‐to‐Rent Investors in the Single‐Family Housing Market: The Emergence of a New Asset Class," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 47(2), pages 399-430, June.
    5. Sjoerd Van Bekkum & Marc Gabarro & Rustom M. Irani & José-Luis Peydró, 2019. "Take It to the limit? The effects of household leverage caps," Economics Working Papers 1682, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2022.
    6. Patrick Bayer & Robert McMillan & Kim Rueben, 2004. "An Equilibrium Model of Sorting in an Urban Housing Market," NBER Working Papers 10865, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Philippe Bracke, 2021. "How Much Do Investors Pay for Houses?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S1), pages 41-73, March.
    2. Jonathan Halket & Lars Nesheim & Florian Oswald, 2015. "The housing stock, housing prices, and user costs," SciencePo Working papers Main hal-03393224, HAL.
    3. Jonathan Halket & Lars Nesheim & Florian Oswald, 2020. "The Housing Stock, Housing Prices, And User Costs: The Roles Of Location, Structure, And Unobserved Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1777-1814, November.
    4. Jonathan Halket & Lars Nesheim & Florian Oswald, 2015. "The housing stock, housing prices, and user costs," Working Papers hal-03393224, HAL.
    5. repec:spo:wpmain:info:hdl:2441/4dp533k0lq8dgrbgue1eid6mk1 is not listed on IDEAS
    6. repec:hal:spmain:info:hdl:2441/4dp533k0lq8dgrbgue1eid6mk1 is not listed on IDEAS
    7. Jessica Rutherford & Ronald Rutherford & Abdullah Yavas & Lei Wedge & Marcus T. Allen, 2025. "Micro Evidence Relating to House Rents, Prices and Investor Size from a Matched Dataset," The Journal of Real Estate Finance and Economics, Springer, vol. 70(1), pages 38-64, January.
    8. Hilber, Christian A.L., 2010. "New housing supply and the dilution of social capital," Journal of Urban Economics, Elsevier, vol. 67(3), pages 419-437, May.
    9. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 588-638, August.
    10. Elliot Anenberg & Edward Kung, 2018. "Can More Housing Supply Solve the Affordability Crisis? Evidence from a Neighborhood Choice Model," Finance and Economics Discussion Series 2018-035, Board of Governors of the Federal Reserve System (U.S.).
    11. Hilber, Christian A.L. & Lyytikäinen, Teemu, 2017. "Transfer taxes and household mobility: Distortion on the housing or labor market?," Journal of Urban Economics, Elsevier, vol. 101(C), pages 57-73.
    12. Giulio Zanella, 2004. "Discrete Choice with Social Interactions and Endogenous Memberships," Department of Economics University of Siena 442, Department of Economics, University of Siena.
    13. Baicker, Katherine & Clemens, Jeffrey & Singhal, Monica, 2012. "The rise of the states: U.S. fiscal decentralization in the postwar period," Journal of Public Economics, Elsevier, vol. 96(11), pages 1079-1091.
    14. Patrick Bayer & Stephen L. Ross, 2006. "Identifying Individual and Group Effects in the Presence of Sorting: A Neighborhood Effects Application," Working papers 2006-13, University of Connecticut, Department of Economics, revised Jan 2009.
    15. Luis Armando Galvis, 2013. "¿El triunfo de Bogotá?: desempeno reciente de la ciudad capital," Coyuntura Económica, Fedesarrollo.
    16. Theodore M. Crone, 2006. "Capitalization of the quality of local public schools: what do home buyers value?," Working Papers 06-15, Federal Reserve Bank of Philadelphia.
    17. Daniel Melser & Robert J. Hill, 2019. "Residential Real Estate, Risk, Return and Diversification: Some Empirical Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 59(1), pages 111-146, July.
    18. Ruben Loon & Tom Gosens & Jan Rouwendal, 2014. "Cultural heritage and the attractiveness of cities: evidence from recreation trips," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 38(3), pages 253-285, August.
    19. Saha, Asish & Rooj, Debasis & Sengupta, Reshmi, 2023. "Macroprudential Policy and mortgage leverage decisions—Evidence from micro data," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1430-1444.
    20. Robert J. Hill & Norbert Pfeifer & Miriam Steurer, 2025. "Spatial Rent Indices for Cities Around the World: A Comparison of Airbnb and Long-Term Rentals," Graz Economics Papers 2025-01, University of Graz, Department of Economics.
    21. Katja Neugebauer, 2021. "Assessing the effectiveness of the Portuguese borrower-based measure in the Covid-19 context," Working Papers w202110, Banco de Portugal, Economics and Research Department.
    22. Kelly, Robert & Mazza, Elena, 2019. "A Measure of Bindingness in the Irish Mortgage Market," Financial Stability Notes 12/FS/19, Central Bank of Ireland.

    More about this item

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpb:discus:449. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cpbgvnl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.