Monetary Policy, User Cost and Inequality : Homeowners versus Renters

User costs of housing are a major part of a household’s expenditure.I empirically investigate the heterogeneous impact of an unanticipatedexpansionary monetary policy on housing markets and householdtenurial decision by exploiting the user cost of housing channel.Drawing on a Swiss household panel data and daily interest rate futures,I find that the less financially constrained households are 3.45percentage points more likely to become homeowners in case of unexpecteddecrease of 100 basis points in 3-month CHF Libor. Thehouseholds in the upper income quartile with pillar 3a savings benefitthe most in case of an unanticipated negative monetary policy shock.The real user cost expenses of renting also benefits significantly by adecrease of on average 19% from an unexpected expansionary monetarypolicy. Single family houses do not benefit from the shocks inthe monetary policy. The findings highlight the importance of apartmentsand multifamily housing