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I Squeezed in and squeezed out: the effects of population ageing on the demand for housing

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  • Andrew Coleman

    (Motu Economic and Public Policy Research)

Abstract

This paper examines how increasing longevity affects the housing choices of working age and retired people using a heterogeneous agent overlapping generations model that incorporates owner-occupier and rental sectors, credit constraints, detailed tax regulations, and a housing supply sector. Increasing longevity is predicted to increase the fraction of older households living in large houses, and reduce home ownership rates among young people, who are squeezed out of the housing market because of higher taxes and house prices. The model suggests raising tax rates to provide pensions rather than relying on private provision can reduce the welfare of all agents, even those who are net beneficiaries over a lifetime, because they tighten credit constraints on agents when they are young.

Suggested Citation

  • Andrew Coleman, 2010. "I Squeezed in and squeezed out: the effects of population ageing on the demand for housing," Working Papers 10_01, Motu Economic and Public Policy Research.
    • Handle: RePEc:mtu:wpaper:10_01
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    File URL: https://motu-www.motu.org.nz/wpapers/10_01.pdf
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    References listed on IDEAS

    as
    1. Sven Rady, 1998. "Housing Market Fluctuations in a Life-Cycle Economy with Credit Constraints," FMG Discussion Papers dp296, Financial Markets Group.
    2. 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.
    3. Andrew Coleman, 2007. "Credit constraints and housing markets in New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2007/11, Reserve Bank of New Zealand.
    4. François Ortalo-Magné & Sven Rady, 2006. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints ," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(2), pages 459-485.
    5. Eric French & John Bailey Jones, 2004. "On the distribution and dynamics of health care costs," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 705-721.
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    Cited by:

    1. Creedy, John & Gemmell, Norman & Scobie, Grant, 2015. "Pensions, savings and housing: A life-cycle framework with policy simulations," Economic Modelling, Elsevier, vol. 46(C), pages 346-357.
    2. Huang Minan & Chen Bingzheng & Deng Yinglu, 2013. "Welfare Effects of Developing the Reverse Mortgage Market in China: An Individual and Social Perspective," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 8(1), pages 27-55, December.
    3. Creedy, John & Gemmell, Norman & Scobie, Grant, 2015. "Pensions, savings and housing: A life-cycle framework with policy simulations," Economic Modelling, Elsevier, vol. 46(C), pages 346-357.

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    More about this item

    Keywords

    Population ageing; tax policy; housing markets; home ownership rates; overlapping generation models; credit constraints.;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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