Abstract
The purpose of this paper is to examine the effect of the housing policy on the long-run household demand function. The policy we investigate in this paper is the subsidy of house rent and housing loan interest subsidy. For this purpose, we use the Epstein-type endogenous rate of time preference function because this formulation allow us to analyze the comparative statistic of the subjective equilibrium in the steady state. We obtained the orthodox results that increasing the subsidy of house rent and the housing loan interest subsidy raise the demand of rented house and own-housing, respectively. Furthermore the long-run demand of the housing service and consumption goods are not affected by the change in the labor income, but it is increased by the rise in market interest rate. The important implication is that the house-hold life-time felicity is increasing function of the market interest rate.
Therefore the housing loan interest rate subsidy may improve the house-hold life-time felicity in the new steady state.
