Private Renting vs. Mortgage Home Buying: Case of British Housing Market—A Bayesian Network and Directed Acyclic Graphs Approach

Janusz Sobieraj,Dominik Metelski

doi:10.3390/buildings12020189

Janusz Sobieraj, Dominik Metelski

Open Access

https://doi.org/10.3390/buildings12020189

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Journal: Buildings	Publication Date: Feb 7, 2022
Citations: 6	License type: CC BY 4.0

Affiliation: Warsaw University of Technology, University of Granada

Abstract

The worsening of housing problems in many countries has become a topic of global interest. Researchers point to a variety of factors that influence individual housing tenure decisions. Our study is based on longitudinal English Housing Survey (EHS) data (2008–2009 to 2019–2020, with survey years matching financial years, i.e., running April–March) and identifies flows between different forms of housing tenure in the U.K. and analyses conditional dependencies of a range of EHS variables using a directed acyclic graph (DAG). More specifically, we take into account variables such as first-time buyers (FTB), mortgage payments, rent payments, share of mortgage/rent in household income, and receipt of housing benefit (HB), with some variables also reflecting a regional breakdown (captured separately for London and England excluding London) to illustrate the complex nature of regional differences in explaining changes in housing tenure. We address some of the problems and challenges of the housing market in the U.K. today, and, in particular, examine what influences private renters and those buying with a mortgage. A key conclusion from this study is that housing benefit does not necessarily ease the way for private renters into their own housing. The study is quantitative in nature and uses the English Housing Survey and Bayesian network (BN) analysis. Unlike traditional methods, such as multiple regression or panel regression, where the researcher somehow suggests the type of a relationship between certain variables, BN’s learning algorithm analyses different iterations between variables and finds the most appropriate relationships between them.

Highlights

In the U.K. market, there has been a multi-year process of relevant shifts in the structure of housing tenure [1,2,3]
Based on the extensive English Housing Survey (EHS) database, the aim of this study is to examine the apparent flows between housing tenure in the context of various variables that find their substantive justification and some theoretical background, i.e., recent first-time buyers (FTB), mortgage payments, rent payments, mortgage/rent as a proportion of household income, receipt of housing benefit (HB), and some variables reflecting regional breakdown
The results of the second model (Table 5) show that an increasing number of those buying with mortgages and all social renters negatively affects the number of private renters

Summary

Introduction

In the U.K. market, there has been a multi-year process of relevant shifts in the structure of housing tenure [1,2,3]. For a number of years, the private rented sector (PRS) has been growing, whereas the owner-occupier market has been shrinking [1]. Despite an adequate supply of housing, the availability of housing on the U.K. market for certain groups of people is consistently declining [1] This mainly affects young adults [5]. A similar problem has been described in other studies covering other countries [6,7] These problems obviously have their causes, namely for the British market: the erosion of the social housing stock, the stagnation of young people’s incomes, and the policy of reducing housing benefits, which mainly affects young adults and single individuals

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