Leverage Regulation and Housing Inequality

49 Pages Posted: 26 May 2023 Last revised: 18 Apr 2024

See all articles by Jens Soerlie Kvaerner

Jens Soerlie Kvaerner

Tilburg University

Nicola Pavanini

Tilburg University; Tilburg University - Tilburg University School of Economics and Management; CEPR IO Programme

Yushi Peng

Tilburg University

Date Written: July 18, 2023

Abstract

We estimate an equilibrium model of housing demand and supply. The model allows us to quantify the distributional effects of leverage regulation on mobility and access to high-quality housing. We match the population of households in Norway in 2010-2018, with demographic and financial characteristics, to the universe of housing transactions. Our model features households’ dynamic renting and owning choices, investors’ housing portfolio rebalancing, and equilibrium pricing across housing products via a market clearing condition. We recover households’ willingness to pay for housing quality and moving costs across the income distribution. Our counterfactuals quantify the regressive effects of tighter loan-to-income (LTI) limits, and document how these depend on household preferences and can be offset limiting investors’ real estate trading.

Keywords: Housing demand, housing supply, leverage regulation, housing quality, dynamic discrete choice

JEL Classification: D15, D31, G21, G51, R21, R31

Suggested Citation

Soerlie Kvaerner, Jens and Pavanini, Nicola and Peng, Yushi, Leverage Regulation and Housing Inequality (July 18, 2023). Available at SSRN: https://ssrn.com/abstract=4460000 or http://dx.doi.org/10.2139/ssrn.4460000

Jens Soerlie Kvaerner

Tilburg University ( email )

Warandelaan 2
Tilburg, -- 4818HK
Norway
40242704 (Phone)
0364 (Fax)

HOME PAGE: http://www.jenskvaerner.com/

Nicola Pavanini (Contact Author)

Tilburg University ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://https://sites.google.com/site/nicolapavanini/

Tilburg University - Tilburg University School of Economics and Management ( email )

PO Box 90153
Tilburg, 5000 LE Ti
Netherlands

CEPR IO Programme ( email )

London
United Kingdom

Yushi Peng

Tilburg University ( email )

P.O. Box 90153
Tilburg, Noord-Brabant 5000 LE
Netherlands

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