Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273816 
Year of Publication: 
2023
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2023-005/V
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
We study the effect of borrowing constraints in an assignment model of the housing market. When constraints apply symmetrically to all households, these lead to lower prices but unchanged housing consumption. When households can invest their own wealth and may differ in tastes, borrowing constraints will in general result in lower house prices and higher housing consumption for unconstrained households, while housing consumption of constrained households may fall. Binding borrowing constraints result in profitable arbitrage possibilities for buy-to-let investors. They can buy houses that are preferred by constrained households unable to finance them, and make them available as rental housing. In an equilibrium with free entry of such investors, house prices and the allocation of houses to households is the same as without borrowing constraints.
Subjects: 
borrowing constraints
housing tenure
arbitrage
buy-to-let investment
assignment models
JEL: 
R31
R21
G51
Document Type: 
Working Paper

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