JOURNAL OF URBAN ECONOMICS 29, 267-281 (1991) The Demand for Housing in Sweden: Equilibrium Choice of Tenure and Type of Dwelling DAVID BROWNSTONE School of Social Sciences, University of California, Iruine, California 92717 AND PETER ENGLUND Department of Economics, Uppsafa University, Box 513, S-751 20 Uppsala, Sweden Received August 1.5, 1988; revised March 27, 1989 Most studies of housing demand and tenure choice only identify two modes of tenure: owner-occupied one-family houses and rental apartments. Furthermore they are typically based on a cross section across all households. In this study we use recent Swedish data to overcome these weaknesses. We identify owner- occupied apartments (coop shares) as a third mode of tenure, and show that this should be treated separately. We also use information about the household’s own assessment of its probability of moving during the nextyear. Wedemonstrate that it makes a large difference if likelymovers areeliminated fromthe sample. o 1991 Academic Press, Inc. 1. INTRODUCTION Several recent econometric studies estimate the household’s choice of tenure jointly with the demand for “quantity” of housing conditional on the tenure chosen (see, e.g., Rosen 1121, King [9], Gillingham and Hagemann [S], Henderson and Ioannides [7], and Brownstone, et al. [2]). Results from such studies are frequently used to analyze tax and subsidy programs related to housing (see the survey by Rosen 1131). Most of these studies share two weaknesses. First, they compare only two modes of tenure: rental apartments and owner-occupied one-family houses. This means that they confound the pure choice of tenure (to own or to rent) with the choice of type of dwelling (house or apartment). Second, they are typically based on a single cross section of randomly drawn households. This means that interpretations of the results must rely on the assumption that transaction costs are negligible and that observed housing conditions reflect “equilibrium demand” at current (or “perma- nent”) values of the explanatory variables. In this paper we investigate how serious these weaknesses are in practice using data from a recent Swedish household survey (HUS). These data contain information about the year when the household moved to its 267 0094-1190/91 $3.00 Copy&hi 8 1991 by Academic Press. Inc. All rights of reproduction in any form reserved.