Abstract
This paper reports the results of an econometric analysis of tenure choice in Australia′s two largest cities, Sydney and Melbourne. 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, this study shows that including user costs in the tenure choice model results in a substantial improvement in goodness-of-fit, but also causes the marginal probability for permanent income to become negative. It is suggested that this may reflect a tendency for higher income groups in the two cities to live in inner locations where renting is more common because prices are high relative to rents.
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