Finance and Economics Discussion Series (FEDS)
August 2024
Partial Homeownership: A Quantitative Analysis
Eirik Eylands Brandsaas and Jens Kvaerner
Abstract:
A convex combination of renting and traditional homeownership—Partial Ownership (PO)—is increasingly popular in many countries. We incorporate an existing for-profit PO contract into a life-cycle model to quantify its impact on investment in housing, households’ welfare, and financial stability. We have the following results: 1) PO makes more households invest in (some) housing. 2) Willingness to pay for PO increases with housing unaffordability and is highest among low-income and renting households. 3) PO may reduce systemic risk despite raising aggregate debt because the most indebted traditional homeowners become partial owners.
Keywords: Partial Homeownership, Housing Affordability, Financial Innovation, Financial Stability
DOI: https://doi.org/10.17016/FEDS.2024.070
PDF: Full Paper
Disclaimer: The economic research that is linked from this page represents the views of the authors and does not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The economic research and their conclusions are often preliminary and are circulated to stimulate discussion and critical comment. The Board values having a staff that conducts research on a wide range of economic topics and that explores a diverse array of perspectives on those topics. The resulting conversations in academia, the economic policy community, and the broader public are important to sharpening our collective thinking.