DEFINE-HOUSING is a simplified model that captures the role of housing in the context of the green transition. It comprises households, firms, commercial banks, a government sector and a central bank. There are two types of households: worker households and investor households (rentiers). Worker households receive their wage income from firms, have deposits and take out mortgages to buy a house. The housing loans can be green or conventional, depending on whether they are used to buy green houses or conventional houses, respectively. Green houses are houses that are characterised by low carbon intensity due to high energy efficiency and the use of renewables/electricity for heating. Worker households receive only a proportion of green and conventional housing loans that they demand (i.e. there is quantity credit rationing in the model). At the aggregate level, some of the worker households are not able to buy a house, so they end up renting a house and paying the rent. Investor households receive distributed profits from firms and banks, interest on deposits and interest on government securities.

Investor households also own houses that are available for sale or rent: some of these houses are sold to worker households, and some other houses are rented to workers. Investor households finance their housing purchases based on their wealth and buy both energy-efficient houses and conventional houses constructed by firms. Both households decide about their consumption based on their disposable income and wealth.

Firms finance their green or conventional investment by using green or conventional loans, as well as their undistributed profits. Green investment is conducive to lower carbon intensity and lower other emissions. Firms build new houses, taking into account the actual demand for houses and housing prices. Firms also refurbish conventional houses, converting them into green ones. Housing prices do not equilibrate the market; instead, they respond to deviations between the demand and the supply of houses.

Manual

Version	Date	Description
DEFINE-HOUSING 2.0	March 2026	DEFINE-HOUSING 1.0 + securitisation
DEFINE-HOUSING 1.0	March 2026	First version of DEFINE-HOUSING