Squeezed in and squeezed out: the effects of population ageing on the demand for housing

type="main" xml:id="ecor12080-abs-0001"> <p>This article examines how increasing longevity affects the housing choices of working age and retired people using a heterogeneous agent overlapping generations model that incorporates owner-occupier and rental sectors, credit constraints, detailed tax regulations and a housing supply sector. Increasing longevity generally leads to declining home ownership rates among young people, with bigger declines if the government increases taxes and pensions rather than relying on additional private provision of retirement income. The model suggests raising tax rates to provide pensions can reduce the welfare of all agents, even those who are net beneficiaries, because they tighten credit constraints on young people.