## kmv 10.1086/708816


## sommer2018 10.1257/aer.20141751
This paper studies the impact of the mortgage interest tax deduction on equilibrium house prices, rents, homeownership, and welfare. We build a dynamic model of the housing market that features a realistic progressive tax system in which owner-occupied housing services are tax-exempt and mortgage interest payments are tax-deductible. We simulate the effect of tax reform on the housing market. Eliminating the mortgage interest deduction causes house prices to decline, increases homeownership, decreases mortgage debt, and improves welfare. Our findings challenge the widely held view that repealing the preferential tax treatment of mortgages would depress homeownership. (JEL H24, H31, R21, R31)

## gks2017 10.1093/rfs/hhx043


## kaas 10.1093/jeea/jvaa004
Abstract The homeownership rate in Germany is one of the lowest among advanced economies. To better understand this fact, we evaluate the role of specific housing policies that tend to discourage homeownership. In comparison to other countries with higher homeownership such as the United States, Germany has an extensive social housing sector with broad eligibility criteria, high transfer taxes when buying real estate, and no tax deductions for mortgage interest payments by owner-occupiers. We build a life-cycle model with uninsurable income and housing risks and endogenous homeownership in order to quantify the policy impact on homeownership and welfare. Adjusting all three policies has a strong impact on housing tenure choices, closing the gap in homeownership rates between Germany and the United States by about two thirds. At the same time, household welfare would be reduced by moving to a policy regime with low transfer taxes, but it would improve in the absence of social housing, in particular, when coupled with housing subsidies for low-income households.

## pazpardo 10.1257/mac.20200473
Earnings are riskier and more unequal for households born in the 1960s and 1980s than for those born in the 1940s. Despite improvements in financial conditions, younger generations are less likely to be living in their own homes than older generations at the same age. By using a life cycle model with housing and portfolio choice that includes flexible earnings risk and aggregate asset price risk, I show that changes in earnings dynamics account for a large part of the reduction in homeownership across generations. Lower-income households find it harder to buy housing and, as a result, accumulate less wealth. (JEL D15, G51, J31, R21, R31)

## boar 10.1093/restud/rdab012
Abstract This article documents that parents accumulate savings to insure their children against income risk. I refer to this behaviour as dynastic precautionary saving. Using a sample of matched parent–child pairs from the Panel Study of Income Dynamics, I test for dynastic precautionary savings by examining the response of parental consumption to the child’s permanent income uncertainty. I exploit variation in permanent income risk across age and industry–occupation groups to confirm that, all else equal, higher uncertainty in the child’s permanent income depresses parental consumption, indicating a precautionary saving motive across generations.

## fagereng 10.1086/712446


## doepke 10.1086/508379


## halket2015 10.1016/j.jmoneco.2015.08.003


## floetotto 10.1016/j.jmoneco.2016.04.005


## borri 10.1016/j.red.2020.09.003


## grossmann 10.1016/j.jet.2021.105275


## kmn2011 10.1111/j.1538-4616.2011.00374.x
This paper is a quantitatively oriented theoretical study into the interaction between housing prices, aggregate production, and household behavior over a lifetime. We develop a life‐cycle model of a production economy in which land and capital are used to build residential and commercial real estates. We find that in an economy where the share of land in the value of real estates is large, housing prices react more to an exogenous change in expected productivity or the world interest rate, causing a large redistribution between net buyers and net sellers of houses. Changing financing constraints, however, has limited effects on housing prices.

## omr2006 10.1111/j.1467-937x.2006.383_1.x


## cgs2009 10.1111/j.1468-2354.2009.00544.x
This article accounts for the boom in homeownership from 1994 to 2005 by examining the roles of demographic changes and mortgage innovations. To measure the impact of these factors, we construct a quantitative general equilibrium overlapping generation model with housing. In the long‐run, mortgage innovation accounts for between 56 and 70% of the increase whereas demographics account for a much smaller portion. We test this result by considering changes in mortgages after 1940. We find that the introduction of the conventional fixed rate mortgage accounts for at least 50% of the observed increase in homeownership during that period.

## mrt2010 10.1016/j.jmoneco.2010.05.001


## nekoei 10.1093/restud/rdac016
Abstract This article aims to measure and understand the role of inheritances in shaping wealth inequality. We use a quasi-experimental design and Swedish administrative data to document that the average heir depletes her inheritance within a decade while the inheritances of wealthy heirs remain intact. These different depletion rates are not due to different consumption or labour supply responses but due to different rates of return on inherited wealth. Upon their receipt, inheritances reduce relative measures of wealth inequality, such as top shares or percentile ratios. Theoretically, this reduction in inequality could be due to either a compressed inheritance distribution or similar chances of having wealthy parents (high intergenerational mobility). Empirically, the first force is more significant in Sweden. Within a decade, however, the effect is reversed: inheritances increase wealth inequality since the different depletion rates widen the inequality in inherited wealth over time. This implies that inheritance taxation can reduce long run wealth inequality only through the taxation of wealthy heirs.

## iacpavan 10.1016/j.jmoneco.2012.10.020


## ssv2013 10.1016/j.jmoneco.2013.04.017


## favilukis2017 10.1086/689606


## sheedy 10.1353/eca.2014.0005
For many households borrowing is possible only by accepting a financial contract that specifies a fixed repayment stream. However, the future income that will repay this debt is uncertain, so risk can be inefficiently distributed. This paper shows that when debt contracts are written in terms of money, a monetary policy of nominal GDP targeting improves the functioning of financial markets. By insulating households’ nominal incomes from aggregate real shocks, this policy effectively achieves risk sharing by stabilizing the ratio of debt to income. The paper also shows that when there is price stickiness, the objective of improving risk sharing should still receive considerable weight in the conduct of monetary policy relative to stabilizing inflation.

## meh2011 10.1111/j.1540-5982.2011.01678.x
Abstract This paper quantifies the redistributional effects of inflation in Canada that arise through the revaluation of nominal assets and liabilities. We find that the effects are non‐trivial even for low inflation episodes. The main winners are young, middle‐class households with mortgage debt. The government receives a windfall gain from its long‐term debt. The old, the rich or the middle‐aged, middle‐class lose, largely owing to their holdings of bonds and non‐indexed defined benefit pension assets. Finally, our Canada‐U.S. comparison reveals that the extent of redistributions can be quite different even between countries of similar economic and legal environments.

## greenwald 10.1257/aer.20211715
Did credit drive the 2000s housing cycle? The existing literature’s findings range from credit having no effect to credit explaining most of the cycle. We show that these disparate results hinge on the extent to which landlords absorb credit-driven demand, which depends on the degree of housing market segmentation. We develop a model that nests cases between the extremes of no segmentation and perfect segmentation typically considered, estimate an elasticity that pins down the degree of segmentation, and use it to calibrate our model. We find credit standards played an important role, explaining 32 percent to 53 percent of the boom. (JEL E32, E44, G51, R21, R31)

## daysal 10.3386/w31669


## benetton 10.2139/ssrn.4163306


## kuhn 10.1086/708815


## eerola 10.1016/j.red.2017.07.003


## cho 10.1016/j.jmacro.2010.09.002


## nakajima 10.1111/iere.12435
Abstract Retired homeowners dissave more slowly than renters, which suggests that homeownership affects retirees' saving decisions. We investigate empirically and theoretically the life‐cycle patterns of homeownership, housing, and nonhousing assets in retirement. Using an estimated structural model of saving and housing decisions, we find first that homeowners dissave slowly because they prefer to stay in their house as long as possible but cannot easily borrow against it. Second, the 1996–2006 housing boom significantly increased homeowners' assets. These channels are quantitatively significant; without considering homeownership, retirees' net worth would be 28%–44% lower, depending on age.

## campbell2021 10.1111/jofi.13056
ABSTRACT We study mortgage design features aimed at stabilizing the macroeconomy. We model overlapping generations of borrowers and an infinitely lived risk‐averse representative lender. Mortgages are priced using an equilibrium pricing kernel derived from the lender's endogenous consumption. We consider an adjustable‐rate mortgage with an option that during recessions allows borrowers to pay only interest on their loan and extend its maturity. The option stabilizes consumption growth over the business cycle, shifts defaults to expansions, and enhances welfare. The cyclical properties of the contract are attractive to a risk‐averse lender so that the mortgage can be provided at a relatively low cost.

## guren 10.1111/jofi.12963
ABSTRACT How can mortgages be redesigned to reduce macrovolatility and default? We address this question using a quantitative equilibrium life‐cycle model. Designs with countercyclical payments outperform fixed payments. Among those, designs that front‐load payment reductions in recessions outperform those that spread relief over the full term. Front‐loading alleviates liquidity constraints when they bind most, reducing default and stimulating housing demand. To illustrate, a fixed‐rate mortgage (FRM) with an option to convert to adjustable‐rate mortgage, which front‐loads payment reductions relative to an FRM with an option to refinance underwater, reduces price and consumption declines six times as much and default three times as much.

## boargm 10.1093/restud/rdab063
Abstract We study the severity of liquidity constraints in the U.S. housing market using a life-cycle model with uninsurable idiosyncratic risks in which houses are illiquid, but agents can extract home equity by refinancing their mortgages. The model implies that four-fifths of homeowners are liquidity constrained and willing to pay an average of 13 cents to extract an additional dollar of liquidity from their home. Most homeowners value liquidity for precautionary reasons, anticipating the possibility of income declines and the need to make mortgage payments. The model reproduces well the observed response of consumption to tax rebates and mortgage relief programs and predicts large welfare gains from policies aimed at providing temporary liquidity relief to homeowners.

## elinder 10.1016/j.jpubeco.2018.06.012


## bonnet 10.3917/redp.253.0317
Dans son ouvrage, Le capital au XXI e siècle , Thomas Piketty souligne les risques d’une explosion des inégalités de patrimoine, car le capital augmenterait plus vite que le revenu dans plusieurs pays, dont la France. Dans cette note, nous montrons que cette conclusion n’est pas plausible. Elle dépend de la hausse d’une seule des composantes du capital : le capital logement. Le capital dit « productif », hors immobilier, n’a que légèrement augmenté dans les dernières décennies, et sur le long terme, n’est pas en hausse tendancielle. Ensuite, si la valeur du capital immobilier mesurée dans les comptabilités nationales a augmenté sur cette période, c’est en raison de la hausse des prix de l’immobilier, qui ont crû beaucoup plus vite que les loyers et que les revenus depuis 2000. Or, les prix de l’immobilier ne sont pas nécessairement corrélés aux revenus du capital logement. Ce sont au contraire les loyers qui le sont, et donc qui importent pour la dynamique des inégalités : ils représentent à la fois les revenus du capital des propriétaires-bailleurs et les dépenses économisées des propriétaires-occupants. Cela ne signifie pas que les prix de l’immobilier n’ont aucun impact sur les inégalités.

## lee2020 10.1016/j.jhe.2018.08.002


## helderman 10.1080/00420980601075018
Parental homeownership influences the younger generation's housing tenure through parental gifts and similarities in housing market circumstances (for example, urban-rural differences), among other mechanisms. This paper contributes to the distinguishing of these mechanisms and their relative importance, using the Netherlands Kinship Panel Study data and logistic regression analysis of housing tenure. Both gift-giving and continuities in housing market characteristics appear to be important mechanisms underlying the intergenerational transmission of homeownership. After controlling for these mechanisms and other individual and parental characteristics, a strong effect of parents' housing tenure on children's housing tenure remains, which may be partly attributed to mechanisms such as socialisation.

## blickle 10.1111/jmcb.12566
Abstract We study the impact of borrowing constraints on home ownership and housing demand by comparing the tenure choice and housing quality of consumers who receive intra‐family wealth transfers to those that do not. Our analysis is based on household‐level panel data providing information on the receipt of wealth transfers, changes in tenure status as well as changes in the size and quality of housing. On average we find that the receipt of a wealth transfer increases the propensity of consumers to transition from renters to home‐owners by 6–8 percentage points (35% of the sample mean). Additional analyses suggest that this effect is unlikely to be driven by wealth effects and can thus be attributed to the relaxation of borrowing constraints. By contrast, wealth transfers do not increase the likelihood that existing homeowners “trade‐up” to larger homes in better locations.

## hubmer 10.1086/712332


## garriga2020 10.1257/aer.20170772
Using a quantitative heterogeneous agents macro-housing model and detailed microdata, this paper studies the drivers of the 2006–2011 housing bust, its spillovers to consumption and the credit market, and the ability of mortgage rate interventions to accelerate the recovery. The model features tenure choice between owning and renting, rich portfolio choice, long-term defaultable mortgages, and endogenously illiquid housing from search frictions. The equilibrium analysis and empirical evidence suggest that the deterioration in house prices and liquidity, transmitted to consumption via balance sheets that vary in composition and depth, is central to explaining the observed aggregate and cross-sectional patterns. (JEL E23, E32, E44, G21, R31)

## adamzhu 10.1111/jeea.12155
Abstract We show that unexpected price-level movements generate sizable wealth redistribution in the Euro Area (EA), using sectoral accounts and newly available data from the Household Finance and Consumption Survey. The EA as a whole is a net loser of unexpected price-level decreases, with Italy, Greece, Portugal, and Spain losing most in per capita terms, and Belgium and Malta being net winners. Governments are net losers of deflation, while the household (HH) sector is a net winner in the EA as a whole. HHs in Belgium, Ireland, Malta, and Germany experience the biggest per capita gains, while HHs in Finland and Spain turn out to be net losers. Considerable heterogeneity exists also within the HH sector: relatively young middle class HHs are net losers of deflation, while older and richer HHs are winners. As a result, wealth inequality in the EA increases with unexpected deflation, although in some countries (Austria, Germany, and Malta) inequality decreases due to the presence of relatively few young borrowing HHs. We document that HHs’ inflation exposure varies systematically across countries, with HHs in high-inflation EA countries holding systematically lower nominal exposures.

## pallotti 10.1016/j.jmoneco.2024.103671


## cloyne 10.1093/restud/rdy074
Abstract Using household survey data for the U.S. and the U.K., we show that the aggregate response of consumption to interest rate changes is driven by households with a mortgage. Outright home-owners do not adjust expenditure at all while renters change their spending but by less than mortgagors. Income rises for all households as interest rate cuts directly affect firm investment and household consumption, boosting aggregate demand. A crucial difference between the housing tenure groups is the composition of their balance sheets: mortgagors hold sizable illiquid assets but little liquid wealth. Our results reveal that general equilibrium effects on household income coupled with balance-sheet-driven heterogeneity in the marginal propensity to consume play a key role in the transmission of monetary policy.

## diaz2008 10.1016/j.red.2007.12.002


## halket2014 10.1016/j.red.2013.06.002


## gete 10.1093/rfs/hhx145


## kartashova 10.1016/j.jbankfin.2017.06.012


## favmab 10.1093/restud/rdac024
Abstract Housing affordability is the main policy challenge for most large cities in the world. Zoning changes, rent control, housing vouchers, and tax credits are the main levers employed by policymakers. How effective are they at combatting the affordability crisis? We build a dynamic stochastic spatial equilibrium model to evaluate the effect of these policies on the well-being of its citizens. The model endogenizes house prices, rents, construction, labour supply, output, income, and wealth inequality, the location decisions of households within the city as well as inter-city migration. Its main novel features are risk, risk aversion, and incomplete risk-sharing. We calibrate the model to the New York metropolitan statistical area. Housing affordability policies carry substantial insurance value but affect aggregate housing and labour supply and cause misallocation in labour and housing markets. Housing affordability policies that enhance access to this insurance especially for the neediest households create substantial net welfare gains.

## bhandari 10.3982/ecta16414
We study optimal monetary and fiscal policies in a New Keynesian model with heterogeneous agents, incomplete markets, and nominal rigidities. Our approach uses small‐noise expansions and Fréchet derivatives to approximate equilibria quickly and efficiently. Responses of optimal policies to aggregate shocks differ qualitatively from what they would be in a corresponding representative agent economy and are an order of magnitude larger. A motive to provide insurance that arises from heterogeneity and incomplete markets outweighs price stabilization motives.

## rognlie 10.1353/eca.2016.0002
In the postwar era, developed economies have experienced two substantial trends in the net capital share of aggregate income: a rise during the last several decades, which is well known, and a fall of comparable magnitude that continued until the 1970s, which is less well known. Overall, the net capital share has increased since 1948, but once disaggregated this increase turns out to come entirely from the housing sector: the contribution to net capital income from all other sectors has been zero or slightly negative, as the fall and rise have offset each other. Several influential accounts of the recent rise emphasize the role of increased capital accumulation, but this view is at odds with theory and evidence: it requires empirically improbable elasticities of substitution, and it presumes a correlation between the capital-income ratio and capital share that is not visible in the data. A more limited narrative that stresses scarcity and the increased cost of housing better fits the data. These results are clarified using a new, multisector model of factor shares.