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Private Home-ownership Finance for Low-income Households

Department of Economics, Freie Universität Berlin, Boltzmannstr. 20, D-14195 Berlin, Germany, horst tomann{at}ccmailer.wiwiss.fu-berlin.de

German home-ownership rates are significantly lower than home-ownership rates in other nations. Perhaps attributable to several reasons, the ownership differential has become a major housing policy concern. This paper analyses the typical liquidity constraints for first-time home-buyers. It is well known that these constraints largely depend on the rate of inflation and result in credit rationing for investors whose income expectations are high but whose capital endowments are poor. Typically, this is the case for young families. Recently, German tax benefit schemes to promote home-ownership were rescheduled to avoid discrimination against young households. Still, the schemes place a high burden on public budgets. By contrast, the German Housing Policy commission proposed a scheme of home-ownership finance that combines private finance with a public pledge to overcome credit rationing. This paper examines the new proposal and its social, economic and fiscal implications.

Urban Studies, Vol. 33, No. 10, 1879-1889 (1996)
DOI: 10.1080/0042098966439


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