Empirical study of tenure choice and user cost for housing

Abstract

We present a model that determines both the discrete tenure choice and continuous demand for floorspace simultaneously, introducing agency costs into rental market and transaction costs into owner occupation, respectively. First, we examine how the user cost of housing capital, the transaction cost and the agency cost respectively affect the lot size of housing and the rate of owner occupation. Second, we empirically examine whether our model can explain the tenure choice, using the data of housing market in Japan.