Housing Tenure, Uncertainty, and Taxation

39 Pages Posted: 26 May 2004 Last revised: 13 Mar 2021

See all articles by Harvey S. Rosen

Harvey S. Rosen

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Kenneth T. Rosen

University of California, Berkeley - Haas School of Business

Douglas Holtz-Eakin

Syracuse University; National Bureau of Economic Research (NBER)

Date Written: July 1983

Abstract

Modern empirical work on the choice between renting and owning focuses on the concept of the "user cost" of housing, which integrates into a single measure the various components of housing costs. The standard approach implicitly assumes that households know the user cost of housing with certainty. However, the ex post user cost measure exhibits substantial variability over time, and it is highly unlikely that individuals believe themselves able to forecast these fluctuations with certainty. In this paper, we construct and estimate a model of the tenure choice that explicitly allows for the effects of uncertainty. The results suggest that previous work which ignored uncertainty may have overstated the effects of the income tax system upon the tenure choice.

Suggested Citation

Rosen, Harvey S. and Rosen, Kenneth T. and Holtz-Eakin, Douglas, Housing Tenure, Uncertainty, and Taxation (July 1983). NBER Working Paper No. w1168, Available at SSRN: https://ssrn.com/abstract=305550

Harvey S. Rosen (Contact Author)

Princeton University - Department of Economics ( email )

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Kenneth T. Rosen

University of California, Berkeley - Haas School of Business ( email )

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Douglas Holtz-Eakin

Syracuse University ( email )

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