HETEROGENEITY, FRICTIONAL ASSIGNMENT, AND HOME‐OWNERSHIP

Allen Head (), Huw Lloyd‐Ellis and Derek Stacey

International Economic Review, 2023, vol. 64, issue 3, 1265-1308

Abstract: We study the composition of the housing stock across ownership and rental markets in a dynamic model of frictional assignment. Houses are rented or sold to heterogeneous households that sort over quality. Due to matching frictions and an increasing ownership surplus, wealthy households tend to own and lower value housing tends to be rented, even without financial frictions or rental supply constraints. When calibrated to match key housing market features of the average U.S. city, the model is consistent with observed empirical relationships across cities. We study the model's implications for affordability, ownership, and the impact of progressive property taxation.

Date: 2023
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https://doi.org/10.1111/iere.12624

Related works:
Working Paper: Heterogeneity, Frictional Assignment And Home-ownership (2021)
Working Paper: Heterogeneity, Frictional Assignment and Home-Ownership (2018)
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