Owner-occupied Housing Research Articles

The Engel Curve of Owner-Occupied Housing Consumption

Housing is a major component of aggregate demand, and understanding how the demand for housing co-varies with income is useful for analysis and policy. While estimating housing consumption for tenants amounts to observing rents, estimating housing consumption for owner-occupiers is challenging because it is not directly observable and interest payments vary with re-paid principals. In order to examine the housing consumption for owner- occupiers, this article combines micro data sets on income and imputed rents for owner- occupiers based on home attributes from a consumer expenditure survey and monthly rents in a rental survey. This allows estimation of an Engel curve of owner-occupied consumption, both parametrically and non-parametrically. Regression results demonstrate that the income share of owner-occupied housing consumption decreases with income, while the Engel elasticity computed at the mean is 0.32 and increasing in income.

What Drives the Owner-Occupied and Rental Housing Markets? Evidence from an Estimated DSGE Model

Most DSGE models with a housing market do not explicitly include a rental market and assume a tight mapping between house prices and rents over the business cycle. However, rents are much smoother than house prices in the data. We match this feature of the data by adding both an owner-occupied housing market and a rental market with nominal rigidity in a standard DSGE model. The housing preference shock explains 35% of the variation in rents but does not contribute much to the dynamics of house prices. The intertemporal preference shock accounts for more than half of the variation in house prices and contributes significantly to residential investment fluctuations through the liquidity constraint. The monetary policy shock explains little of the fluctuations in the price-rent ratio. Nominal rigidity in rental contracts plays an important role in capturing the smoothness of rents and the large variation in the price-rent ratio.

Bricks, Mortar, and Wedding Bells: Does the Cost of Housing Affect the Marriage Rate in the US?

This paper examines the relationship between the cost of housing and the rate of marriage in 2,450 US counties over the period 1970–1999. It is found that the burden of housing costs appears to play a role in the decision to marry. A higher ratio of the cost of owner-occupied housing to per capita income in a given county is associated with a lower marriage rate. The analysis is also extended to include a measure capturing the relationship between the cost of owning housing and the cost of renting and marriage. Evidence suggests that the greater the difference between the annual cost of owning housing and renting as a proportion of per capita income in a county, the lower the marriage rate.

The “squeezed middle” on the Dutch housing market: how and where is it to be found?

New regulations on the allocation of social housing recently came into effect in the Netherlands as a result of a state-support complaint filed by institutional investors to the European Commission. At least 90 % of vacant social housing dwellings has to be allocated to households with a yearly income of less than €34,000. This has caused concerns about the availability of housing among (lower-)middle-income households. They can no longer access social housing, and due to the prevalence of social housing and the fiscal favoring of owner-occupied housing, the affordable private rented sector is almost absent in the Netherlands. Thus, currently they rely on the owner-occupied housing market with their restricted financial budgets and might lose out. This study substantiates this assumed “squeezed middle” problem with empirical data for housing regions in the Netherlands. The adopted spatial analysis method shows to what extent and where lower-middle-income households have access to homeownership in the Netherlands, and how the “squeezed middle” varies among the Dutch regional housing markets. The spatial analysis indicates that in some regions, there indeed is a group of middle-income households that is “squeezed.” Yet, the study also reveals that the problem might be more qualitative than quantitative in nature: households may not be able or willing to trade-off location for access to more affordable or more appropriate housing.

The Dynamics of Housing Prices

We present a simple model of the price process of a capital asset that is subject to serially correlated demand shocks, and whose supply responds with a lag. In this setting the price of the asset can exhibit positive serial correlation over short intervals and negative serial correlation over longer intervals. In an examination of the prices of owner-occupied housing in 97 metropolitan areas between 1980 and 2008, we find that price changes exhibit positive serial correlation at the one year interval, with subsequent reversals of price changes over longer intervals. In addition, consistent with the model, our tests indicate that the price process is influenced by proxies for the serial correlation in demand as well as the elasticity of the supply responses.

Validity of an ecometric neighborhood physical disorder measure constructed by virtual street audit.

Neighborhood physical disorder is thought to affect mental and physical health, but it has been difficult to measure objectively and reliably across large geographical areas or multiple locales. Virtual street audits are a novel method for assessing neighborhood characteristics. We evaluated the ecometric properties of a neighborhood physical disorder measure constructed from virtual street audit data. Eleven trained auditors assessed 9 previously validated items developed to capture physical disorder (e.g., litter, graffiti, and abandoned buildings) on 1,826 block faces using Google Street View imagery (Google, Inc., Mountain View, California) dating from 2007-2011 in 4 US cities (San Jose, California; Detroit, Michigan; New York, New York; and Philadelphia, Pennsylvania). We constructed a 2-parameter item response theory scale to estimate latent levels of disorder on each block face and defined a function using kriging to estimate physical disorder levels, with confidence estimates, for any point in each city. The internal consistency reliability of the resulting scale was 0.93. The final measure of disorder was positively correlated with US Census data on unemployment and housing vacancy and negatively correlated with data on owner-occupied housing. These results suggest that neighborhood physical disorder can be measured reliably and validly using virtual audits, facilitating research on possible associations between physical disorder and health.

The Effect of the District of Columbia’s Assessment Limitation on Property Tax Equity

In 2002, the District of Columbia implemented the Residential Property Tax Credit program. This program, while technically a credit, is in effect a property tax assessment limitation that applies to owner-occupied housing. Initially, the maximum growth in net assessed value was set at 25 percent, but is now 10 percent. Property tax assessment limitations are expected to create significant variations in net taxable assessments across property, both vertically and horizontally, and we explore the extent of the variations created by the assessment limitation in the District of Columbia. We find substantial variations, both vertically and horizontally. We also explore explanation for the magnitude of the variations.

The making of the modern British home: the suburban semi and family life between the wars

This book explores the impacts of the modern suburban semi-detached house on British family life during the 1920s and 1930s—focusing primarily (though not exclusively) on working-class households who moved from cramped inner-urban accommodation to new suburban council or owner-occupied housing estates. Migration to suburbia is shown to have initiated a dramatic transformation in lifestyles—from a ‘traditional’ working-class mode of living, based around long-established tightly knit urban communities, to a recognizably ‘modern’ mode, centred around the home, the nuclear family, and building a better future for the next generation. This process had far-reaching impacts on family life, entailing a change in household priorities to meet the higher costs of suburban living, which in turn impacted on many aspects of household behaviour, including family size. This book also constitutes a general history of the development of both owner-occupied and municipal suburban housing estates in interwar Britain, including the evolution of housing policy; the housing development process; housing and estate design, layouts, and architectural features; marketing owner occupation and consumer durables to a mass public; furnishing the new suburban home; making ends meet; suburban gardens; social filtering and conflict on the new estates; and problems of mis-selling and ‘jerry-building’. It thus integrates the social history of the interwar suburbs with their economic, business, marketing, and architectural/planning histories, demonstrating how these elements interacted to produce a new model of working-class lifestyles and ‘respectability’ which marked a fundamental break with pre-1914 urban communities.

Public Rental Housing as Middle-Class Entitlement? Economic Analysis of the Slovak Public Rental Housing Policy

The article explores economics of public rental housing policy in Slovakia. Our principal research question is: why has construction of such housing not succeeded in activating rental market and labour mobility? The secondary question is: does the policy ensure that public housing projects are economically meaningful and well-targeted? Four case studies were examined to determine who bears the costs of housing construction and whether disadvantaged groups benefit from the public housing subsidies. We show that there are no constraints pushing for targeted allocation to lower-income families. With proper calculation of costs, municipalities allocate housing, but share only a small percentage of the costs and bear risk of rent non-payment. The current framework thus provides incentives for local governments to prefer indefinite leases to middle-class tenants. Therefore, it is simply owner-occupied housing in disguise, but there is a substantial subsidy compared to market cost of housing – approximately 50%.

Equity induced up-trading and the housing market structure

Purpose – The purpose of this paper is to highlight the importance of home equity and the interplay between market segments for housing market developments. The intention is to show that it is not only the aggregate equity gain but also the distribution of equity gains between segments that matter for how shocks to income impact house prices. Design/methodology/approach – The paper sets out a linear housing market model with three segments. Households trade up a housing ladder and link the three segments for owner-occupied housing. The up-trading is equity-induced. An expression for the house price index, which is related to the market segment prices both directly through the segment size and indirectly through a segment position on the housing ladder is derived. The author considers the price effects of shocks to income in four housing market regimes. Findings – The heterogeneous housing market model shows how the interplay between segments impacts housing markets. When considering shocks to income, short-run deviations in the price-to-income (PTI) ratio compared to their long-run equilibrium due to equity-induced up-trading were found. The extent of PTI overshooting is related to the intensity of equity-induced up-trading between different segments. The market structure necessary to eliminate such overshooting is contingent on the distribution of equity gains between segments. Finally, the paper shows how the price effects of macroprudential interventions might be non-negligible when indirect effects are taken into account. Originality/value – The linear housing market model with three market segments introduces a framework where the intensity of equity-induced up-trading in different market segments can be analyzed. This distributional aspect is, to the best of the author's knowledge, novel. The context-specific relation between housing market structure, equity-induced up-trading and short-run deviations in the PTI ratio provides a foundation for future research.

Distribution Impact of the Mortgage Interest Deduction in the Czech Republic

This paper focuses on the mortgage interest deduction for owner-occupied housing in the Czech Republic. The main research question concerns the distribution of personal income tax liability given the rather generous interest deduction for owner-occupied housing loans and changes to it when restrictions are placed on the interest deduction in 2014. We used data for the Czech Republic from the EU-SILC surveys for our analysis. We estimated the value of this tax expenditure at approximately CZK 4.1 billion in 2011, with more than half the amount spent by the highest two deciles in income distribution. Personal income tax reform is legislated to begin in 2015 one part of which will be a cap on loan interest. This reform will lead to a decrease in the yearly value of the tax expenditure but will be followed by an increase in the PIT rate. Taken together, this will generate greater tax expenditures. Our computations show that the impact will be negative on households in the highest decile, while other groups will feel some benefit.

Second-Generation Policy Priorities for Colonias and Informal Settlements in Texas

Along the Texas border with Mexico, more than 400,000 people live in over 2,000 informal self-help settlements known as colonias. These exceedingly low-income, largely Latino settlements have historically suffered from severe health risks, poor infrastructure and housing conditions, and physical and social isolation. Researchers and policymakers have focused extensively on what I call “first-generation policy priorities.” This has primarily entailed efforts to regularize title and infrastructure, support self-help home improvement for colonia homeowners, and prevent the growth of new informal settlements along the border region. I provide a comprehensive review of existing research on colonias to document the myriad ways in which housing and infrastructure conditions and titling practices have changed since these settlements first proliferated throughout the border region in the second half of the 20th century. These changes necessitate a rethinking of the policy priorities for colonias and informal settlements throughout the state. In particular, I argue that colonias must be recast to recognize the significant improvements that have taken place but also the long-term and sometimes severe problems that persist. These “second-generation policy priorities” include the development of sustainable forms of governance, regulation, and finance to address ongoing infrastructure investment needs in colonias; supporting access to and upkeep of safe and affordable renter- and owner-occupied housing through both self-help and contractor-led projects; ensuring long-term title clarity; and promoting community organizing in new and aging settlements.

A practice–theory approach to homeowners' energy retrofits in four European areas

This article examines whether and how energy retrofitting of owner-occupied dwellings can be understood within the framework of social practice theories. Practice theories help to shift the focus towards more collective approaches and practices, rather than towards individuals. In addressing this question, energy retrofits are described and their variability compared in four European areas: Denmark, Latvia, the Coimbra area in Portugal and Wallonia in Belgium. Although these areas have different geographical, cultural and housing contexts, the Energy Performance of Buildings Directive (EPBD) provides a common form of regulation. As a policy, its main underlying intention is to promote the opportunities for energy retrofitting. Based on an analysis of 60 in-depth interviews with homeowners, it is found that energy retrofitting is not an integrative practice in 2010, despite the EPBD and other efforts to enforce such a practice. This lack of a retrofitting practice exists for a variety of reasons: it is not sustained by common and conventionalized routines, and by shared know-how and goals among relevant actors (e.g. homeowners and craftsmen). Based on practice theories, novel policy recommendations are provided to help to constitute an energy-related renovation practice in detached owner-occupied houses.

COMPETITION IN THE DUTCH MORTGAGE MARKET: NOTES ON CONCENTRATION, ENTRY, FUNDING, AND MARGINS

This article describes the institutions that shape the Dutch mortgage market, as well as how they affect mortgage funding, and, ultimately, mortgage interest rates. The Dutch housing market is characterized by a very large social housing sector, as well as a relatively large share of owner-occupied housing. The private rental sector is underdeveloped. As a result, Dutch residents buy their first house at a relatively young age, with low personal savings and a mortgage loan that has a high loan-to-value ratio. Banks in The Netherlands rely heavily on international capital markets for funding, and the financial crisis has had a strong impact on funding costs. In our view, the increase in funding costs is the main cause of the increase in mortgage interest rates and the exit of several foreign lenders after the start of the financial crisis. We also discuss the investigation into mortgage interest rates that was carried out by the Netherlands Competition Authority.

The rise of renters and renting in Texas colonias

Owner-occupied housing is the norm in the low-income, informal settlements along the US–Mexico border known as colonias. As a result, renters and renting have been largely overlooked by both scholars and policymakers. Using GIS technology and data provided by the US Census Bureau from 2000 to 2011, this article is the first to 1) document the growth of renting in these settlements in recent years and the nature and extent of the rental market, and 2) explore important differences between owner and renter households and the myriad ways in which colonia renters are more vulnerable than homeowners. The results suggest that renting in colonias is largely informal and occurs primarily in single-unit homes, many of which were built via self-help by the owner and have since been converted to rental property. As a result of these findings, it is argued that renting in colonias more closely resembles the rental market in informal settlements throughout the developing world than it does the rental market elsewhere in Texas, and thus the rise of renting in colonias presents unique challenges that merit attention by both scholars and policymakers. The article concludes by drawing upon insights from research on renting in the developing world in order to highlight key policy priorities regarding renting in colonias.

Differential income taxation and household asset allocation

This article empirically investigates the effects of differential income taxation on households’ portfolio choice and asset allocation, applying a two-stage budgeting model of asset demand to German survey data. The model is structured into the discrete and the continuous asset choice. Cross-sectional variation in marginal tax rates, appropriately instrumented, as well as over-time variation from a major tax reform are used to identify the tax effects. Households with higher tax rates are found to have relatively greater demand for tax-privileged assets, such as nonowner-occupied housing, mortgage repayments, building society deposits, stocks, insurances and consumer credits, than households with lower tax rates. Demand at higher tax rates is lower for owner-occupied housing, bank deposits and bonds.

Why Is Housing Finance Still Stuck in Such a Primitive Stage?

The institutions for financing owner-occupied housing have not progressed as they should, and the financial innovation that has followed the financial crisis of 2007-2009 has not been focused on improving the risk management of individual homeowners. This paper lists a number of barriers to housing finance innovation, and in light of these barriers, the problems of some major innovations of the past and future: self-amortizing mortgages, price-level adjusted mortgages (PLAMs), shared appreciation mortgages (SAMs), housing partnerships, and continuous workout mortgages (CWMs).

Individual and area-level socioeconomic status and their association with depression amongst community-dwelling elderly in Singapore

Objectives: Neighborhood socioeconomic status (SES) can be associated with depression. We aimed to assess prevalence of depression amongst community-dwelling elderly in a multiethnic, urban, low-SES, Asian neighborhood, comparing against a higher SES neighborhood.Method: The study population involved all residents aged ≥60 years in two Singaporean housing estates comprising owner-occupied public housing (higher SES) and public rental housing (low SES) in 2012. Having lifetime prevalence of depression was defined as having a score ≥5 on the Geriatric Depression Scale-15 or a history of depression. Demographic/clinical details were collected via questionnaire. Those with depression were referred to local polyclinics. Multilevel multivariate logistic regression determined predictors of depression and depression screening.Results: Participation was 61.5% (559/909). In the low-SES community, 26.2% (104/397) had depression, compared with 14.8% (24/162) in the higher SES community. After adjusting for other sociodemographic variables, staying in a low-SES community (public rental housing) was independently associated with depression [adjusted odds ratio (aOR) = 1.68, 95% confidence interval (CI) = 1.02–2.84]. Within the low-SES community, not being married (aOR = 2.27, CI = 1.35–3.70), falls (aOR = 2.72, CI = 1.59–4.67), visual impairment (aOR = 2.37, CI = 1.28–4.39), and poorer social network (aOR = 3.70, CI = 1.96–7.14) were associated with depression.Conclusion: Residing in a low-SES community was independently associated with depression after controlling for individual SES.

Why is Housing Finance Still Stuck in Such a Primitive Stage?

The institutions for financing owner-occupied housing have not progressed as they should, and the financial innovation that has followed the financial crisis of 2007-9 has not been focused on improving the risk management of individual homeowners. This paper lists a number of barriers to housing finance innovation, and in light of these barriers, the problems of some major innovations of the past and future: self-amortizing mortgages, price-level adjusted mortgages (PLAMs), shared appreciation mortgages (SAMs), housing partnerships, and continuous workout mortgages (CWMs).

Consumerism and Indebtedness

The aim of this paper is to bring sociological interpretations of a consumerism and an indebtedness. Currently, consumer spendings of households have become financed more and more by debts. The explanation includes several reasons. At first, it is the preference to consume and spend money from household disposible income and from loans. Secondly, households are motivated by increase of living standards, by an afford to do so and by an increase of the real wage. Thirdly, there were other motivations for increase of indebtedness such as a shift to owner-occupied housing, effective marketing of financial intermediaries and easy availability of money. The focus is on insufficient awareness of the rational strategies of householdś financial management and the idea of rational re-education of people.