Urban housing with discrete structures

Competitive equilibrium in an urban housing model with structures that cannot be readily aggregated or subdivided is analyzed in this paper. The price and quantity of services forthcoming from each dwelling occupied by a household is determined by the equality of competitive supply and demand. A stack algorithm is then developed to ensure households are assigned to dwellings so that they would not prefer to live in any other dwelling with an equilibrium price less than the one they would pay if they lived there. Using the Urban Institute Housing Model as an example, the results of this algorithm are compared with those of the algorithm developed by de Leeuw and Struyk (D-S). The stack algorithm yields greater price discounting of existing dwellings below the price of a new dwelling than does the D-S algorithm and, thus, a greater potential for housing prices to be increased by a demand subsidy such as a housing allowance.