This paper reports the results of an econometric analysis of the choice between home owning and renting in Australia. Particular attention is given to assessing the significance of the user cost of owner-occupied housing for tenure decisions . Using cross-sectional data from a 1991 housing survey of Sydney and Melbourne , this study shows that including user costs in the tenure choice model results in a substantial improvement in goodness-of-fit. The paper concludes with suggestions for possible applications of the model.