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arXiv · 2611.03202

Renting, Owning, and Moving: Housing Tenure Choice with Transaction Costs

Kexin Chen·Gugyum Ha·Junkee Jeon
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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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Kexin Chen, Gugyum Ha, Junkee Jeon. 2026-11-02. Renting, Owning, and Moving: Housing Tenure Choice with Transaction Costs. https://arxiv.org/abs/2611.03202

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