Handling Heterogeneity in Assessing Residential Satisfaction

Abstract

Residential satisfaction depends on housing and neighborhood conditions in addition to housing cost affordability. To determine the relative importance of these factors, their average effect is usually estimated using sample data, eventually split in subsamples to represent different levels of socioeconomic status. A concern about the division of households into groups is that, as groups are modified or group assignments change, results of quantitative analysis applied to such data can dramatically change. This article follows a subjective well‐being approach to study residential satisfaction. We propose a novel empirical design to estimate how the effect of drivers of residential satisfaction change across household income distribution. We apply our empirical design to investigate residential satisfaction in 23 European countries using 2012 EU‐SILC module on housing conditions. Our results show that: (i) in Europe, residential satisfaction is driven first by housing‐specific characteristics, followed by neighborhood conditions and individual/household characteristics; (ii) the probability to be satisfied or very satisfied strongly differs across countries, everything else being equal; (iii) residents with different socioeconomic status attach importance to particular factors affecting residential satisfaction.