Winnick's Case for a Changing Attitude Toward Housing: Comment

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Louis Winnick's argument in this Journal,' that there has been a long-run downward shift in consumers' preferences for housing, rests on two basic assumptions: 1. Consumer behavior is appropriately analyzed with reference to capital outlays rather than carrying costs. 2. The demand for housing is much more elastic with respect to income than with respect to price. Both of these assumptions are subject to question. With reference to first, although Winnick does concede that the size of capital outlay a family is willing to make for a house is not independent of annual level of carrying costs,2 this is only a parenthetical qualification on his part. However, if qualification and assumption are interchanged, argument can be reversed; it can be contended that over years there has been an upward shift in consumers' preferences for housing. Consider following line of reasoning. Budget studies show that persons with high incomes spend a smaller proportion of their income on annual housing costs than do persons with low incomes. From this we should expect that for community as a whole ratio of carrying costs to income would decline as income rose. In fact as Winnick points out, ratio of carrying costs to income has remained relatively unchanged. If changing relative prices can be assumed to have had a negligible effect (as Winnick argues), we are justified in inferring an upward shift in consumer preferences for housing. Clearly, then, it is a matter of first importance whether consumer behavior is more appropriately analyzed in terms of carrying costs or capital outlays, since implications drawn with regard to consumer preferences are diametrically opposed. There is no unequivocal answer to this problem; assumption employed largely depends on which consumers we are talking about. Tenants are concerned only with carrying costs. Home buyers must consider both factors,