Application of Agent-based Modelling for Estimation of Norm-based Dynamics of Housing Systems

Abstract

Housing systems are mainly defined by the housing tenure structure in a particular society. We assume that choice of housing tenure is determined by economic factors, the life course and social interactions that reproduce and/or weaken the social norm that deems one housing tenure – homeownership – is superior to another housing tenure – renting. By applying agent-based modelling, we show that strong adherence to the social norm (and the transmission of this norm across generations within the family) may theoretically substantially reduce the probability of any permanent change occurring in the housing system, even when a decrease in the affordability of owner-occupied housing or significant changes in market conditions are modelled. This finding can improve our understanding of the dynamics of housing systems and uncover its inertia, which is not captured in the prevailing theoretical approaches to economic forecasting.