The cost of capital, tax reform, and the future of the rental housing market

Article Abstract:

The effects of inflation, interest rates, and tax policy on the supply and demand for rental housing are examined using an econometric model. Results suggest that the demand for rental housing is affected by the capital cost of homeownership. This means that the demand for rental housing is high when homeownership is expensive, and low when homeownership is cheap. Findings also point to the influence of the Tax Reform Act of 1986 on owner and rental capital costs. There are indications that the Tax Reform has led to the decline in rental housing construction and that it will raise real rents by 8% in the coming years.

Rental housing

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An intertemporal model of housing demand: implications for the price elasticity

Article Abstract:

A dynamic model of housing demand is developed. The model is based on the assumption that within a given wealth constraint households will maximize an intertemporal utility function. The research discovered that the response to changes in the user cost of housing cannot be predicted by a single price elasticity because the response is dependent on the source of the user cost change.

Research, Housing, Urban economics

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