Measuring heterogeneous preferences for residential amenities

Abstract

This study reports on estimates of heterogeneous preferences for residential amenities among households in the Mountain West region of the US. The estimates are derived from a choice experiment funded by the Utah Department of Transportation and Utah Transit Authority—an experiment based upon large samples of both homeowners and renters who participated in a larger, statewide transportation study. The choice experiment and transportation study allow us to control for a rich set of household-level demographic and lifestyle characteristics, which in turn permits identification of a host of factors contributing to heterogeneity in residential preferences. We leverage a percentage-change housing cost attribute included in the experiment to obtain measures of marginal willingness to pay (MWTP) for the various residential attributes and attribute levels in our study. Our method of converting the percentage-change cost attribute to dollar-denominated MWTP results in theoretically plausible estimates of a household's MWTP. We find that preferences for residential amenities differ across homeowners and renters with respect to intensity rather than direction—homeowners are generally willing to pay more for these amenities, in some cases up to seven times more. Our quantitative estimates of these preferences and the extent to which we control for heterogeneity across households provide urban and regional planners with precise monetary welfare measures for a sizable majority of the region's residents.