The demand for rental housing: Evidence from the Housing Allowance Demand Experiment

This paper provides new evidence on the price and income elasticities of demand for rental housing by low income households. Housing expenditures of households participating in the Housing Allowance Demand Experiment and receiving housing allowances in the form of a proportional rent rebate are analyzed. These rent rebates experimentally vary the effective relative price of housing and thus enable estimation of the price elasticities. Natural income variation enables estimation of income elasticities. Analysis is carried out using two functional forms and a variety of models of housing dynamics. The estimated income and price elasticities of demand are 0.36 and −0.22, respectively. When the sample is restricted to include only households headed by couples, the elasticity estimates are 0.47 for income and −0.36 for price. These estimates are lower (in absolute value) than have been previously estimated and it is suggested that this may be due to the low-income nature of the sample.     

An econometric model of housing price, permanent income, tenure choice, and housing demand

This paper addresses the determination of housing price, permanent income, tenure choice, and housing demand. Full housing demand elasticities incorporate the interactive effects among the four stages of the model. Price and income have major effects in the tenure choice equation. Sociodemographic variables, such as age, have complex effects that may be lost in simpler forms of estimation.     

Household Expenditure Patterns for Housing Attributes: A Linear Expenditure System with Hedonic Prices

The main objective of this research is to demonstrate a new approach to how income and own-price elasticities for housing attributes can be estimated. The methodology used is a combination of the hedonic technique and a complete system of household expenditures, which relies on an additive utility function. However, here we allow the utility parameters to vary with family size. The empirical results of a case study show that family size plays a significant role when estimating the elasticities. Furthermore, the housing attributes of living area and absence of traffic noise are more income elastic than those of lot size and indoor quality. All the income elasticities are positively correlated with income and family size but negatively with down payment.     

Permanent income,hedonic prices,and demand for housing: New evidence

Housing demand is examined by looking quite specifically at the income and price variables based on individual household data. Permanent and transitory incomes are computed through instrumental variables related to human and nonhuman wealth. A price is constructed by spatially varying hedonic techniques. Separation of measured income into permanent and transitory components substantially improves the predictive power of the housing demand estimation and leads to demand elasticities of +1 and ?1 with respect to permanent income and price. The permanent income elasticity is roughly twice the measured income elasticity.     

Tenure choice and housing demand in Japan

This paper reports the results of an empirical analysis of tenure choice and housing demand that makes use of household-level data from Japan. The paper finds that the price and permanent-income elasticities of demand for owneroccupied housing are approximately −0.8 and 1.4, respectively, and that these estimates are highly robust. The price elasticity estimate is comparable to those for other countries, but the income elasticity estimate is much higher, possibly because of the greater accuracy of the income variable. It is also found that the tenure choice and housing demand decisions are apparently not made simultaneously.     

Estimating the Demand for Housing, Land, and Neighbourhood Characteristics

This paper provides estimates of the structure of demand for individual housing and neighbourhood characteristics and for land in two British cities. We estimate a hedonic price function, and from this obtain the implicit prices of house attributes. These prices are used to estimate a demand system for each city. These perform well, and enable us to calculate price and income elasticities for each of the non-dichotomous characteristics and for land. To counteract criticisms of demand estimates derived within the hedonic framework a method is developed for selecting an appropriate set of instrumental variables. Estimates derived from this method, however, differ only slightly from those obtained using the conventional techniques. Several features of these estimates provide insights into the unusual characteristics of the British housing market, the effects of constraints imposed by land use planning, and the effects of changing income distribution on the structure of demand.     

Cross-sectional estimation of a simultaneous model of tenure choice and housing services demand

In this paper we analyze the demand for housing services, integrating into a single analysis a systematic treatment of several important conceptual and empirical issues. Our three major objectives are to (1) evaluate the empirical importance of the simultaneity between the tenure choice and consumption level decisions; (2) analyze the relationship between household type and housing demand; and (3) present new estimates of the parameters of housing demand which are based on detailed microdata. In the process, we derive and estimate overall income and price demand elasticities which incorporate the impacts of income and price on both the tenure choice and consumption level decisions.     

Housing demand and disequilibrium

Researchers have recently begun relying heavily on samples of recent movers to estimate housing demand parameters. Estimates from mover, equilibrium, and disequilibrium samples are compared to determine whether significant differences exist. The results suggest that income elasticities are not affected by the sample distinctions, but demographic effects vary across the different subsamples.     

Permanent and transitory income in models of housing demand

Permanent income has for some time been recognized as the appropriate income variable for models of housing demand. This paper examines a recently developed model wherein permanent and transitory income are considered to be the fitted and residual components, respectively, of a regression of actual income on several household characteristics. An important caveat for these models is pointed out. One logical remedial strategy is shown to result in underidentification for the coefficient on permanent income. However, the technique uncovers a tangential result which summarizes why an alternative class of models can be expected to underestimate income elasticities.     

The relationships between income and price elasticities in studies of housing demand,tenure choice,and household formation

Three decisions pertaining to the demand for housing are (1) household formation, (2) tenure choice, and (3) how much housing to consume, given the household formation and tenure choice decisions. Income and price elasticities can be estimated that include one, two, or all three of these decisions. The relationships between these elasticities are developed.     

HOUSING DEMAND IN A TRANSITIONAL MARKET: MOSCOW

Before Russia began its transition toward the market, its housing sector was perhaps the most controlled in the world. This paper employs data from a 1994 survey of Moscow households to estimate housing demand functions to evaluate whether behavior is consistent with market principles. Statistically significant, robust income elasticities are found for families who have engaged in recent market housing transfers. Insignificant results are found for those renting state-owned units. Families who have engaged in market housing transfers are smaller, younger and wealthier than other families in Moscow and end up living in less crowded conditions than state renters. The use of per capita living space as a proxy for market value, as has been done in previous studies of housing in Russia and the Soviet Union, is also evaluated.     

The demand for housing in developing countries: The case of Korea

This paper presents the results of an analysis of urban housing demand for Korea taking into account the most recent findings of housing demand analysis concerning specification and aggregation biases. In order to obtain correctly specified demand functions, a procedure based on a model of the housing market originally proposed by Muth is used. Drawing on the detailed land information available in Korea, this procedure permits the calculation of an individual price per unit of housing services for each household. The results show conclusively that both the income and price elasticity of the demand for housing services in Korea are comparable to those found in the United States: the income elasticity is smaller than one and the price elasticity is negative and smaller than one in absolute value. Given the number of countries found within the per capita income range between Korea ($700) and the United States ($7800), the finding that these two countries have comparable demand elasticities is of major significance: in the absence of good national estimates, the order of magnitudes found here would be used for other country analyses.     

Property taxation and the demand for housing: An econometric analysis

There is disagreement among economists regarding the effect of a local increase in property taxation on the housing market. In defining the price of housing services studies of the demand for housing have treated the property tax exclusively as an excise tax on housing consumption. Two recent theoretical developments suggest this is a misrepresentation of the tax. One theory holds that the excise effects of property taxation may be shifted backward to the factors employed in the production of housing. The other theory concludes that the property tax is not an excise, but rather serves as an efficient price for local public services. To investigate these hypotheses, data from the Annual Housing Survey were employed to estimate a housing demand model which included the net effective property tax rate among the set of independent variables. In addition to revealing the property tax-housing demand relationship, the model provides more reliable estimates of income and price elasticities by eliminating specification errors found in previous studies. Results indicate that the property tax reduces the housing consumption of central city homeowners, but does not distort the suburban housing market.     

The Built‐in Flexibility of Income and Consumption Taxes

This paper reviews, and synthesises within a uniform framework, a number of analytical results on the built‐in flexibility of taxation. Established results for income taxes are reviewed and integrated with recent results for consumption taxes. These help to provide a better understanding of the determinants of the revenue responsiveness properties of different taxes. They also provide convenient expressions for the calculation of tax revenue elasticities in practice. It is shown that the magnitude of revenue elasticities can be expected to differ substantially for alternative taxes, for different forms of the same tax, and for the same tax over time as incomes change relative to tax thresholds and as consumption patterns change. These results are especially relevant for the many industrialised countries which have undertaken major fiscal reforms in recent years with, often unintended, consequences for revenue elasticities.     

Discrete choice models and the housing price and travel to work elasticities of location demand

Multinomial logit and nested logit models of mode choice in travel to work and housing location choice are estimated from 1970 U.S. census data aggregated to small zones of the Chicago SMSA. The estimated models are then used to derive the “housing rent,” “travel time,” and “travel cost” elasticities of location demand. The effects of sampling variation, sample size, attribute inclusion, model specification, and estimation method on the estimated elasticities are evaluated and found to be important. The elasticities are also compared and found to agree with those obtained from other discrete choice models and, in the case of “housing rent,” with estimates obtained from models based on other theoretical structure.     

House Prices and Housing Investment in Sweden and the UK: Econometric Analysis for the Period 1970–1998

We estimate quarterly dynamic housing demand and investment supply models for Sweden and the UK for the sample period 1970–1998, using an Error Correction Method (ECM). To facilitate comparisons of results between Sweden and the UK we model both countries identically with approximately almost the similar type of exogenous variables. The long–run income elasticities for Sweden and the UK are constrained to be 1.0, respectively. The long–run semi–elasticity for interest rates are 2.1 and 0.9 for Sweden and the UK. The speed of adjustment on the demand side is 0.12 and 0.23, while on the supply side it is 0.06 and 0.48 for Sweden and the UK, respectively. Granger causality tests indicate that income Granger causes house prices for Sweden, while for the UK there is also feedback from house prices to income. House prices Granger cause financial wealth for Sweden, while for the UK it is vice–versa. House prices cause household debt for Sweden, while for the UK there is a feedback from debt. Interest rates Granger cause house prices for the UK and Sweden. In both countries Tobin's q Granger cause housing investment. Generally, the diagnostic tests indicate that the model specifications were satisfactory to the unknown data generating process.     

Housing supply price elasticities revisited: Evidence from international, national, local and company data

This paper re-examines one of the key parameters in housing economics – the price elasticity of housing supply. In the international literature, there is little agreement on its value or even on the appropriate methodology for its measurement. The paper argues that different spatial scales capture different aspects of the problem and, therefore, there is merit from comparing results at international, national, local and firm level. Using standardised models, there is evidence that the responsiveness of housing supply to market conditions is lower in Britain than in the US or Australia. However, supply is more responsive to the change in house prices than their level. With exceptions, most past research on supply in Britain concentrates on the national or regional dimensions. The paper finds that there are also insights to be obtained from examining local and firm level data. Local estimation across the Thames Gateway shows the importance of planning constraints on supply elasticities, but historical patterns of land use and geography are also important. Firm level data indicate that supply elasticities are greater for large firms than for small firms.     

Housing, taxation and retirement provision

This paper considers the tax treatment of housing and the issue of savings for retirement in the context of a simplified model that still allows key aspects of the household context to be realistically represented. A model is developed in which both housing and financial assets can be used as vehicles for household saving. Individuals face perfect capital markets and choose between owner-occupied and rented accommodations. For the model developed, it is shown that the tax advantage of owner-occupied housing is not fully removed even if imputed rents are subject to income taxation. However, deferred income taxation for both housing and savings in the form of financial assets would result in an equal treatment of tenants and owner-occupiers.     

The reduced form price elasticity of housing

This paper focuses on the modeling of the housing market. First, there is a discussion of terminology. The importance of distinguishing between housing and structures, and between reduced form and supply elasticities is emphasized. Second, the role of tastes and technology is emphasized. Third, the integration of the housing market into a general equilibrium urban model to investigate such issues as the effects of a housing subsidy is discussed. Throughout attention is drawn to what additional information is needed to provide an adequate empirical characterization of the housing market.     

Labour supply in Italy: an empirical analysis of joint household decisions,with taxes and quantity constraints

This study applies an econometric framework which allows for complex non-convex budget sets, highly non-linear labour supply curves and imperfect markets with institutional constraints. A married couple's version of the model is estimated on Italian microdata. The empirical results show that male labour supply is rather inelastic while labour supply among females, especially participation, is considerably more elastic. The elasticities depend strongly on household income. The largest elasticities are found for females living in poor households. The results of the tax simulations suggest that there are only modest labour supply responses from replacing the 1987 system by proportional taxes. Copyright © 1999 John Wiley & Sons, Ltd.