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Housing Tenure, Uncertainty, and Taxation

  • Harvey S. Rosen
  • Kenneth T. Rosen
  • Douglas Holtz-Eakin

Modern empirical work on the choice between renting and owning focuses on the concept of the "user cost" of housing, which integrates into a single measure the various components of housing costs. The standard approach implicitly assumes that households know the user cost of housing with certainty. However, the ex post user cost measure exhibits substantial variability over time, and it is highly unlikely that individuals believe themselves able to forecast these fluctuations with certainty. In this paper, we construct and estimate a model of the tenure choice that explicitly allows for the effects of uncertainty. The results suggest that previous work which ignored uncertainty may have overstated the effects of the income tax system upon the tenure choice.

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File URL: http://www.nber.org/papers/w1168.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1168.

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Date of creation: Jul 1983
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Publication status: published as Rosen, Harvey S., Kenneth T. Rosen and Douglas Holtz-Eakin. "Housing Tenure, Uncertainty, and Taxation." The Review of Economics and Statistics, Vol . 66, No. 3, (August 1984), pp. 405-416.
Handle: RePEc:nbr:nberwo:1168
Note: PE
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  1. Plosser, Charles I & Schwert, G William & White, Halbert, 1982. "Differencing as a Test of Specification," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 535-52, October.
  2. Diamond, P. A. & Hausman, J. A., 1984. "Individual retirement and savings behavior," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 81-114.
  3. Rosen, Harvey S & Rosen, Kenneth T, 1980. "Federal Taxes and Homeownership: Evidence from Time Series," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 59-75, February.
  4. Martin Feldstein & Lawrence Summers, 1983. "Inflation, Tax Rules, and the Long-term Interest Rate," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 153-185 National Bureau of Economic Research, Inc.
  5. Jorgenson, Dale W, 1971. "Econometric Studies of Investment Behavior: A Survey," Journal of Economic Literature, American Economic Association, vol. 9(4), pages 1111-47, December.
  6. 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.
  7. Joines, Douglas H, 1981. "Estimates of Effective Marginal Tax Rates on Factor Incomes," The Journal of Business, University of Chicago Press, vol. 54(2), pages 191-226, April.
  8. Fair, Ray C & Jaffee, Dwight M, 1972. "Methods of Estimation for Markets in Disequilibrium," Econometrica, Econometric Society, vol. 40(3), pages 497-514, May.
  9. Dwight M. Jaffee & Kenneth T. Rosen, 1979. "Mortgage Credit Availability and Residential Construction," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(2), pages 333-386.
  10. Patric H. Hendershott & Joel Slemrod, 1982. "Taxes and the User Cost of Capital for Owner-Occupied Housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 10(4), pages 375-393.
  11. Dougherty, Ann & Van Order, Robert, 1982. "Inflation, Housing Costs, and the Consumer Price Index," American Economic Review, American Economic Association, vol. 72(1), pages 154-64, March.
  12. Swan, Craig, 1973. "The Markets for Housing and Housing Services: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(4), pages 960-72, November.
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