Housing need and search markets

Abstract

Purpose: The housing need (owning a home to live in) represents one of the primary needs of people. Housing markets are search markets and, thus, the relation between housing need and trading frictions deserves a lot of attention. Design/methodology/approach: To study the relation between housing need and trading frictions, this theoretical paper develops a search and matching model. To the best of our knowledge, this is the first paper that addresses the topic by the search and matching theory. Findings: The model finds that only in a case the supply side’s profit maximisation condition coincides with the housing need satisfaction. In general, therefore, search markets are not able to satisfy the housing need. Housing policies that protect the weaker side (the demand side) of the market are thus needed. Policy implications: Housing policies can increase the “actual” and the “realised” housing demand, but a “potential” housing demand remains unsatisfied. Hence, labour market policies that increases both employment and wages are also needed. Originality/value: To the best of our knowledge, this is the first paper that analyses the housing market equilibrium with search frictions from the perspective of “non-well-off first-time buyers”. Research limitations/implications: This model represents a first theoretical attempt to study the housing need by the search and matching framework. Future studies, therefore, should further develop the theoretical model by considering the close link between housing and labour markets.