Three Essays on Housing in Dynamic Economies

The homeownership rate in Germany amounts to 44 %. This homeownership rate is the lowest within the Euro-Area and is lower than in any other comparable industrialized country. Homeownership rates outside of Germany are in most cases at around 60 % or even higher. This thesis tries to rationalize the gap in homeownership rates between Germany and other countries from its peer group through differences in the social security system and taxation. A precautionary savings motive that is linked to limited coverage of long-term care risk in social security or a small-scale pension system can lead to a higher homeownership rate. The same is true for preferred treatment of real estate in the tax system. Germany has one of the most generous social security systems. It provides good coverage of long-term care risk, which limits the need to self-insure, dampens precautionary savings and might ultimately contribute to the low homeownership rate. The German tax system further provides limited subsidy to owner-occupied real estate. Instead, high real estate transfer taxes rather hinder access to homeownership. This is in contrast to other countries that allow tax credits in the form of mortgage interest deduction and waive real estate transfer taxes for certain groups. The thesis aims to contribute to the understanding of the underlying household decisions that lead to homeownership. It sketches the distributional mechanisms at work and identifies optimal policies. How do policies that promote homeownership interact with the effects of other policy choices? If so, to what extent and what are the distributional consequences? What is the impact on optimal income taxation? Does redistribution arise only within generations or as well between generations?