Housing tenure choice

Abstract

This article revisits the microeconomics of housing tenure choice. It asks, How does a rational consumer make housing tenure decisions? The article builds on earlier papers on the subject in two ways. First, it brings together all relevant components of the portfolio decision in a single and coherent analytical framework. Second, it presents numerical analysis with carefully chosen national data and post-1986 tax reform tax provisions. The conclusion is that occupancy required for ownership to be rational is probably somewhat longer than it was during the 1970s and early 1980s, and is probably longer than many economists suspect. It seems apparent from the numerical analysis that substantial segments of the U.S. population should not be owner-occupiers regardless of anticipated occupancy.

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Mills, E.S. Housing tenure choice. J Real Estate Finan Econ 3, 323–331 (1990). https://doi.org/10.1007/BF00178856

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Key words

  • Housing
  • Tenure
  • Occupancy
  • Rent
  • Ownership