Title

Housing, Distribution and Welfare

Author(s)

Nobuhiro Kiyotaki Nobuhiro Kiyotaki (Princeton University)

Alexander Michaelides Alexander Michaelides (Imperial College London)

Kalin Nikolov Kalin Nikolov (European Central Bank)

Abstract

Housing is a long-lived asset whose value is sensitive to variations in long-term growth and interest rates. When a large fraction of the population is leveraged, housing price fluctuations cause large-scale redistribution and consumption volatility. We examine policies to mitigate the impact of housing fluctuations on vulnerable households. We find that the most practical way to insure the young and the poor from the housing cycle is through a well-functioning rental market. In practice, home-ownership subsidies keep the rental market small and the housing cycle affects aggregate consumption. Removing home-ownership subsidies hurts older home-owners, while leverage limits hurt younger home-owners.

Creation Date

2020-04

Section URL ID

Paper Number

2020-52

URL

http://www.princeton.edu/~kiyotaki/papers/KMN_4.2020.pdf

File Function

Jel

D15, D58, E02, E21

Keyword(s)

Housing prices, credit constraints, distribution, rental markets, welfare

Suppress

false

Series

13