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Housing, Distribution and Welfare

Author

Listed:
  • Nobuhiro Kiyotaki

    (Princeton University)

  • Alexander Michaelides

    (Imperial College London)

  • 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.

Suggested Citation

  • Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2020. "Housing, Distribution and Welfare," Working Papers 2020-52, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:2020-52
    as

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    File URL: http://www.princeton.edu/~kiyotaki/papers/KMN_4.2020.pdf
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    More about this item

    Keywords

    Housing prices; credit constraints; distribution; rental markets; welfare;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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