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Housing Tenure in a Model of Consumer Choice: A Simple Diagrammatic Analysis
Author(s) -
Fallis George
Publication year - 1983
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00278
Subject(s) - economics , diagrammatic reasoning , renting , housing tenure , consumer choice , microeconomics , simple (philosophy) , utility maximization , econometrics , labour economics , mathematical economics , philosophy , epistemology , linguistics , political science , law
The paper begins with a general model of demand for housing in an intertemporal utility maximization framework. Under standard assumptions the consumer is indifferent between owning and renting. Relaxation of various assumptions would explain tenure choice, but this is mathematically complex. As an alternative, a diagrammatic model of consumer choice over one period is presented which shows the effects of income, savings, housing and other prices, mortgage interest rates, rates of return on alternative investments, and tastes. Again under standard assumptions the consumer is indifferent about housing tenure. The effects on tenure choice of a change in the assumption about the availability of mortgage credit, rates of return on alternative investments and income taxes are demonstrated.