1 Introduction
2 The survey: micro evidence
Owning | No opinion | Renting | |
---|---|---|---|
Economic factors | |||
E1. Mortgage/rental costs | 64.0 | 23.4 | 12.6 |
E2. Risk of house price/rent fluctuations | 65.6 | 22.8 | 11.6 |
E3. Transaction costs | 62.1 | 26.1 | 11.8 |
E4. Taxes | 61.0 | 25.3 | 13.7 |
Psychological factors | |||
P1. Social status | 70.8 | 19.5 | 9.7 |
P2. Freedom and independence | 71.1 | 16.5 | 12.3 |
P3. Comfort | 71.6 | 17.0 | 11.3 |
P4. Peace of mind | 70.9 | 17.8 | 11.2 |
P5. Well-being | 71.5 | 17.9 | 10.5 |
P6. Attachment to dwelling | 70.1 | 18.5 | 11.3 |
P7. Family | 72.6 | 18.0 | 9.4 |
P8. Happiness | 68.8 | 21.1 | 10.1 |
Agree | No opinion | Don’t agree | |
---|---|---|---|
Factors decreasing the comfort of being a tenant | |||
Tenants are too much constrained in arranging apartment | 56.8 | 30.2 | 12.9 |
Landlords are inspecting the apartment too often | 53.3 | 34.4 | 12.2 |
Tenants are not well protected against rent increases | 56.2 | 31.0 | 12.7 |
Tenants are not well protected against eviction | 56.7 | 31.1 | 12.1 |
Rents are too high in comparison with mortgage installment | 53.9 | 33.3 | 12.7 |
The offer of dwellings to rent is too scarce to meet preferences | 46.8 | 35.9 | 17.3 |
Factors decreasing the attractiveness of investing in rental housing | |||
Low culture of tenants | 62.6 | 28.9 | 8.6 |
Excessive rent control | 50.3 | 37.2 | 12.4 |
Excessive protection of tenants against eviction | 40.3 | 43.6 | 16.1 |
Low rate of return | 39.4 | 47.3 | 13.3 |
Low demand | 44.0 | 41.6 | 14.4 |
3 Panel regressions: macro evidence
3.1 Specification
3.2 The data
eurostat
package in R
(Lahti et al. 2017). A detailed information about the series is as follows: tipsho20
). It should be added that the panel of data for \(\Delta hp_{it}\) is unbalanced. The missing data are: Estonia (2004–2005), Hungary (2004–2007), Poland (2004–2008), Romania (2004–2008), and the Slovak Rep. (2004–2006).nama_10_gdp
).irt_lt_mcby_a
), which was deflated by the private final consumption expenditure deflator (ticker nama_10_gdp
). The series describes the yields of government bonds denominated in national currencies, traded on the secondary market, with a residual maturity of around 10 years. The missing data for Estonia were replaced by the series for Finland.tipsdp26
), divided by the value of nominal GDP (ticker nama_10_gdp
). The missing values of outstanding loans for Belgium (2003–2011), Ireland (2003–2011), the Netherlands (2003–2011), and Portugal (2003–2011) were filled in using data taken from central banks Web pages.ilc_lvho02
), and in rare cases of missing data they were interpolated with the na.fill
function in R
. The interpolation is justified as changes in the tenure structure are usually highly gradual.3.3 Results
Dependent variable: \(\Delta hp\) | ||||||||
---|---|---|---|---|---|---|---|---|
(i) | (ii) | (iii) | (iv) | (v) | (vi) | (vii) | (viii) | |
\(\Delta hp_{-1}\) | 0.369\(^{***}\) | 0.339\(^{***}\) | 0.530\(^{***}\) | 0.406\(^{***}\) | 0.400\(^{***}\) | 0.371\(^{***}\) | 0.331\(^{***}\) | 0.343\(^{***}\) |
(0.053) | (0.051) | (0.053) | (0.069) | (0.050) | (0.044) | (0.045) | (0.053) | |
\(\Delta y\) | 0.884\(^{***}\) | 1.706\(^{***}\) | 1.108\(^{***}\) | 1.317\(^{***}\) | 1.438\(^{***}\) | 1.224\(^{***}\) | ||
(0.143) | (0.156) | (0.171) | (0.171) | (0.173) | (0.178) | |||
\(\Delta r\) | − 1.098\(^{***}\) | − 2.307\(^{***}\) | − 1.496\(^{***}\) | − 1.391\(^{***}\) | − 1.237\(^{***}\) | − 1.354\(^{***}\) | ||
(0.198) | (0.263) | (0.266) | (0.270) | (0.263) | (0.259) | |||
\(\Delta L\) | 0.174\(^{**}\) | 0.497\(^{***}\) | 0.114 | 0.202 | 0.349\(^{**}\) | 0.281\(^{**}\) | ||
(0.079) | (0.169) | (0.128) | (0.134) | (0.152) | (0.143) | |||
\(\Delta y\times \hbox {RMS}\) | − 0.057\(^{***}\) | − 0.029\(^{***}\) | − 0.023\(^{**}\) | − 0.025\(^{***}\) | − 0.030\(^{***}\) | |||
(0.009) | (0.009) | (0.009) | (0.009) | (0.009) | ||||
\(\Delta r\times \hbox {RMS}\) | 0.096\(^{***}\) | 0.062\(^{***}\) | 0.060\(^{***}\) | 0.057\(^{***}\) | 0.058\(^{***}\) | |||
(0.016) | (0.016) | (0.016) | (0.015) | (0.015) | ||||
\(\Delta L\times \hbox {RMS}\) | − 0.018\(^{**}\) | 0.001 | 0.001 | − 0.008 | − 0.011 | |||
(0.009) | (0.007) | (0.008) | (0.010) | (0.009) | ||||
\(\hbox {RMS}/100\) | 0.026 | 0.138\(^{***}\) | 0.027 | 0.039 | 0.093\(^{***}\) | 0.094\(^{***}\) | 0.210 | 0.258\(^{*}\) |
(0.023) | (0.028) | (0.025) | (0.037) | (0.031) | (0.030) | (0.134) | (0.140) | |
Ind. effects | No | No | No | No | No | No | Yes | Yes |
Time effects | Yes | Yes | Yes | Yes | Yes | No | No | Yes |
Number of obs. | 370 | 370 | 370 | 370 | 370 | 370 | 370 | 370 |
\(R^{2}\) | 0.713 | 0.699 | 0.691 | 0.565 | 0.744 | 0.708 | 0.730 | 0.760 |
Ind. effects, stat | 0.697 | 1.048 | 0.401 | 0.842 | 0.810 | |||
Prob | 0.870 | 0.403 | 0.997 | 0.695 | 0.738 | |||
Time effects, stat | 3.027 | 3.796 | 9.415 | 12.99 | 3.719 | |||
Prob | 0.000 | 0.000 | 0.000 | 0.000 | 0.000 | |||
AR, stat | 3.473 | 5.006 | 0.221 | 12.02 | 1.323 | 2.794 | 0.200 | 0.484 |
Prob | 0.062 | 0.025 | 0.638 | 0.000 | 0.250 | 0.095 | 0.655 | 0.486 |
CSD, stat | − 1.546 | − 1.593 | − 1.369 | 0.779 | − 1.784 | 4.710 | 4.177 | − 1.894 |
Prob | 0.122 | 0.111 | 0.171 | 0.436 | 0.074 | 0.000 | 0.000 | 0.058 |
Hausman, stat: | 26.79 | 14.30 | 4.46 | 48.80 | 38.37 | 19.92 | 0.1063 | |
Prob | 0.000 | 0.006 | 0.347 | 0.000 | 0.000 | 0.011 | 1.000 |
4 DSGE model: matching the micro and macro evidence
4.1 Savers
4.2 Borrowers
4.3 Firms
4.4 Monetary authority and equilibrium conditions
5 Reforming the rental market
5.1 Calibrating the model
Parameter | Value | Description |
---|---|---|
\(\beta _{s}\) | 0.995 | Discount factor of savers |
\(\beta _{b}\) | 0.985 | Discount factor of borrowers |
j | 0.06 | Relative weight on utility from housing services |
\(\omega _{l}\) | 0.14 | Weight parameter in labor services aggregator |
\(\omega _{h}\) | 2/3 | Weight parameter in housing services aggregator |
\(\varepsilon _{l}\) | 1 | Elasticity of substitution between labor types |
\(\varepsilon _{h}\) | 2 | Elasticity of subst btw. home ownership and rent |
\(\eta \) | 1 | Inverse elasticity of labor supply |
\(\varepsilon _{p}\) | 6 | Elasticity of substitution among intermediate goods |
\(\gamma \) | 2/3 | Savers labor-income share |
\(\delta _{h}\) | 0.75% | Depreciation rate of the housing stock |
\(\delta _{z}\) | 1.00% | Depreciation rate of the rental stock |
\(\overline{k}\) | 0.8 | Maximum LTV ratio (steady state) |
\(\theta \) | 0.75 | Calvo parameter |
\(\tau _{h}\) | 0 | Subsidy rate house purchases for owner occupation |
\(\tau _{z}\) | − 0.085 | Subsidy rate on rent payments (here taxes) |
\(\rho \) | 0.9 | Coefficient on lagged nominal interest rate in Taylor rule |
\(\phi _{\Pi }\) | 0.5 | Coefficient on inflation in the Taylor rule |
\(\phi _{Y}\) | 0.5 | Coefficient on output in the Taylor rule |
Data | Model | Data sources | |
---|---|---|---|
Housing rental Share, \(H_{z}/H\) | 0.069 | 0.068 | Survey data |
Share of housing w/ mortgage, \(H_{b}/H\) | 0.104 | 0.172 | Survey data |
Rent over housing price, \(q_{z}/q_{h}\) | 0.015 | 0.015 | National Bank of Poland, 2007–2015 |
Residential investment / GDP, \(q_{h}IH/GDP\) | 0.033 | 0.034 | OECD, 2007–2015 |
Construction labor share, \(L_{h/}(L_{c}+L_{h})\) | 0.076 | 0.077 | OECD, 2007–2015 |
5.2 Steady-state analysis
Benchmark | Neutral taxes | Lower “bad tenant” risk | Professional rental services | Combined | |
---|---|---|---|---|---|
\(\tau _z=0\) | \(\delta _z=0.75\%\) | \(\omega _h=0.5\) | |||
Housing rental share | 0.068 | 0.077 | 0.091 | 0.104 | 0.150 |
Share of housing w/mortgage | 0.172 | 0.167 | 0.160 | 0.132 | 0.113 |
Rent over housing price | 0.015 | 0.015 | 0.0125 | 0.015 | 0.0125 |
Residential investment/GDP | 0.034 | 0.034 | 0.034 | 0.034 | 0.034 |
Construction labor share | 0.077 | 0.077 | 0.076 | 0.077 | 0.077 |
Mortgage debt/GDP | 0.609 | 0.594 | 0.574 | 0.466 | 0.409 |
5.3 Impulse response analysis
IR shock | Technology shock | LTV shock | ||||
---|---|---|---|---|---|---|
Benchmark | Reform | Benchmark | Reform | Benchmark | Reform | |
GDP | 1.5722 | 1.5505 | 1.8121 | 1.8071 | 1.0934 | 0.7935 |
Inflation | 0.8037 | 0.7902 | 0.3655 | 0.3751 | 0.4310 | 0.3092 |
House prices | 0.8427 | 0.8248 | 1.9734 | 2.0049 | 0.7124 | 0.5548 |