Abstract
The article present a three period olg model showing how households can use housing investment to smooth consumption of housing services and consumption goods over the life cycle in the presence of borrowing constraints. Households face a borrowing constraint restricting them to only borrow up to a fraction of the value of their housing investment. Households have an incentive to buy houses when young rather than rent in order to shift some of the cost of housing consumption to the future. When households must buy a minimal house size in order to become homeowners, poor households may be forced to rent rather than buy when young. They then loose access to credit markets, making them unable to smooth consumption between periods. Conditioning access to credit markets on housing investment therefore amplifies the effects of income inequality on consumption inequality.