Housing Choice in a Regulated Market: A Nested Multinomial Logit Analysis

Abstract

The paper integrates several important elements of the institutionalized and regulated nature of the housing market and analyzes the relationship between household type and housing choice in Vienna within a nested multinomial logit framework. In particular, the concept of household specific choice sets is used to account for institutional, informational and income‐based constraints of the choice process. Government subsidies (such as housing and rent allowances, non‐interest‐bearing state loans) are explicitly taken into account in the definition of variables. Housing choice is considered in three stages: the choice of a dwelling unit given dwelling type and residential zone, the choice of a dwelling type given residential zone, and the marginal choice of a residential zone. The coefficients are derived by means of a sequential ML‐procedure. The empirical results clearly indicate that demographic variables have significant impacts on housing choice behavior. Income as a single explanatory variable as well as its interacting with size measures and the quality of the house are found to be important criteria for dwelling unit choice, as housing cost variables for dwelling type choice behavior. The dwelling unit and dwelling type choice submodels fit reasonably well, whereas the residential zone model is less successful.