The Journal of Real Estate Finance and Economics

, Volume 43, Issue 4, pp 491–504 | Cite as

Valuing Homeownership

  • Khalid SekkatEmail author
  • Ariane Szafarz


Housing tenure decision combines financial, economic and socio-psychological factors. This paper considers the global premium associated to homeownership. On the one hand, homeownership is associated to private benefits of being an owner. On the other hand, overinvestment in housing is harmful to diversification and distorts portfolio management. This trade-off, similar to the one associated to corporate private benefits of control, is the cornerstone of our theoretical model based on the expected utility maximization. The originality of the model comes from its simplicity. Furthermore, the empirical implementation of the model, using price and rent data normalized by square-meter, exhibits a homeownership premium for houses in the Brussels Region reaching at least 9% of the housing price. The findings are robust to several methodological refinements. In particular, they confirm the link between liquidity constraints and house prices documented in the literature. However, the premium may largely vary from one place to another, according to tax laws, cultural habits and social status associated to tenure.


Homeownership Tenure choice Housing Real-estate 
JEL Classification R21 E21 G11 



The authors thank Carlos Garriga and anonymous referees for very useful comments.


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Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Solvay Brussels School of Economics and Management (SBS-EM), DulbeaUniversité Libre de Bruxelles (ULB)BrusselsBelgium
  2. 2.Solvay Brussels School of Economics and Management (SBS-EM), Centre Emile BernheimUniversité Libre de Bruxelles (ULB)BrusselsBelgium

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