Renting, Owning, and Moving: Housing Tenure Choice with Transaction Costs
Abstract
The wealth thresholds at which a household switches between renting and owning depend on its preferences, but the dates at which some owner sells or every renter buys do not. In our finite-horizon model, a household chooses consumption, a portfolio, and costly tenure changes while rents, ownership expenses, and transaction costs vary over time on announced dates. When financial markets span house-price risk, these dates are those of a deterministic minimum cost schedule for housing, discounted at the risk-adjusted housing carry and computed from a scalar reflected equation. Preferences, housing services, and labor income only locate the thresholds inside these timing windows, and house-price coefficients enter the dates only through the carry, because financial hedging offsets the exposure of the home. When owning costs at least as much as renting, the windows concern selling, and an anticipated selling surcharge closes the selling window before the surcharge peaks and keeps it closed for years afterwards. We also establish strong duality and the regularity of the thresholds and compute them by integral equations. Numerically, the windows disappear when short sales or borrowing are restricted but do not move with the preferences we vary under an uninsurable increase in the ownership cost.
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BibTeX
@misc{chen2026renting,
title = {{Renting, Owning, and Moving: Housing Tenure Choice with Transaction Costs}},
author = {Kexin Chen and Gugyum Ha and Junkee Jeon},
howpublished = {arXiv},
year = {2026},
month = nov,
doi = {10.48550/arxiv.2611.03202},
eprint = {2611.03202},
archivePrefix = {arXiv},
url = {https://arxiv.org/abs/2611.03202},
}
RIS
TY - UNPB
TI - Renting, Owning, and Moving: Housing Tenure Choice with Transaction Costs
AU - Kexin Chen
AU - Gugyum Ha
AU - Junkee Jeon
PY - 2026
DA - 2026/11/02
PB - arXiv
DO - 10.48550/arxiv.2611.03202
UR - https://arxiv.org/abs/2611.03202
AB - The wealth thresholds at which a household switches between renting and owning depend on its preferences, but the dates at which some owner sells or every renter buys do not. In our finite-horizon model, a household chooses consumption, a portfolio, and costly tenure changes while rents, ownership expenses, and transaction costs vary over time on announced dates. When financial markets span house-price risk, these dates are those of a deterministic minimum cost schedule for housing, discounted at the risk-adjusted housing carry and computed from a scalar reflected equation. Preferences, housing services, and labor income only locate the thresholds inside these timing windows, and house-price coefficients enter the dates only through the carry, because financial hedging offsets the exposure of the home. When owning costs at least as much as renting, the windows concern selling, and an anticipated selling surcharge closes the selling window before the surcharge peaks and keeps it closed for years afterwards. We also establish strong duality and the regularity of the thresholds and compute them by integral equations. Numerically, the windows disappear when short sales or borrowing are restricted but do not move with the preferences we vary under an uninsurable increase in the ownership cost.
ER -