Work in progress

Abstract: We study the quantitative importance of borrowing constraints for house price dynamics. To this end, we build an overlapping-generations model where households finance their housing with mortgages that are subject to a down payment constraint and solve for the non-linear dynamics following different shocks. We find that for certain shocks, borrowing constraints substantially affect house price dynamics. Because of borrowing constraints, house price dynamics may also display important asymmetries between big positive and big negative shocks. This is related to the fact that the share of households that are borrowing constrained may change a lot over time. [paper]

The optimal tax treatment of housing capital in the neoclassical growth model (with Niku Määttänen) HECER working paper (2007)

Abstract: In a dynamic setting, housing is both an asset and a consumption good. But should it be taxed like other forms of consumption or like other forms of saving? We consider the optimal taxation of the imputed rent from owner housing within a version of the neoclassical growth model. We find that the optimal tax rate on the imputed rent is quite sensitive to the constraints imposed on the other available tax rates. In general, it is not optimal to tax the imputed rent at the same rate as business capital income. [paper]