Owner-occupied Housing Research Articles

The special importance of housing policy for ethnic minorities: evidence from a comparison of four Nordic countries

The purpose of this article is to explore whether housing policy has a special importance for immigrants, compared with the whole population, by comparing housing policies and immigrants’ housing outcomes in four Nordic countries: Denmark, Finland, Norway and Sweden. There are substantial differences between housing policies and housing outcomes in Nordic countries, despite their common background as social-democratic welfare states. The study shows that immigrants occupy a very different position on the housing market in each of these countries, and in particular that the degree of overcrowding among immigrants compared with the whole population varies a great deal. These differences can only to some extent be explained by inequalities between income groups on the housing markets in the countries: inequalities that affect immigrants. Other important explanations as to why immigrants have worse housing outcomes is the shortage of rental housing (e.g. in Norway), which increases the scope for discrimination and forces immigrants into overcrowded owner-occupied housing, and also rent and price control that create surplus demand and stronger competition between house hunters, which makes room for discrimination and reduces immigrants’ access to private renting in particular (e.g. in Denmark). Housing policy initiatives that improve immigrants’ housing options are strict needs tests for social/public housing (as is the case in Finland).

Housing Choices and Labor Income Risk

I show that individuals whose unemployment risk tends to increase more when local home prices fall optimally invest less in owner-occupied housing. Using a unique, Swedish register-based database, I find that a one standard deviation increase in the covariance between individually estimated unemployment risks and local home prices implies an average increase in the value of households' investments in owner-occupied housing of USD 13,300. Further, I find, in line with the predictions of my theoretical model, that same-industry couples rent more often, but, conditional on ownership, invest USD 9,200 more on average in single-family homes than different-industry couples.

Analysis of Wealth using Micro and Macro Data: A Comparison of the Survey of Consumer Finances and Flow of Funds Accounts

Researchers use different types of household balance sheet data to study different aspects of lifecycle saving and wealth accumulation behavior. Macro data from the Flow of Funds Accounts (FFA) are produced at a quarterly frequency and are available in a timely manner, but they can only be used to study the behavior of the household sector as a whole. Micro data from the Survey of Consumer Finances (SCF) are available every three years and only with a lag, but they can be used to address questions that involve differences in behavior over time and across various types of households. Despite the very different approaches to estimating household net worth, the two data sets show the same general patterns wealth changes over the past twenty-five years. Areas where the FFA and SCF diverge in aggregate levels—in categories such as owner-occupied housing, noncorporate equity, and credit cards—may be explained by methodological decisions applied in the production of the data. Those differences do not fundamentally alter one's perception of household wealth dynamics in the period leading up to and following the Great Recession.

Is Urban China’s CPI Underreported?

Many have doubts about statistics, including the consumer price index (CPI) released by Chinese Government. We re-estimate the CPI in urban China from 1997 to 2009, with two widely accepted approaches to treating owner-occupied housing (i.e., user cost approach and consumption cost approach). The results are not considerably different from the NBS statistics, especially for recent years.

Agent-based Housing Market Microsimulation for Integrated Land Use, Transportation, Environment Model System

The Housing Market Evolutionary System (HoMES) is the updated housing market module for the Integrated Land Use, Transportation, Environment (ILUTE) model system. HoMES is a disaggregate, agent-based microsimulation of the owner-occupied housing market, with models for households’ residential mobility decisions, location choices and valuations, the endogenous supply of housing by type and location, and the endogenous determination of sale prices and rents. The new model offers significant improvements over previous attempts by including a reformulated market clearing mechanism, market dependency on macro-economic conditions, and improved computational performance. A 100% synthesized population is validated against historical data for the Greater Toronto-Hamilton Area.

Mortgage Interest Deductions and Homeownership: An International Survey

The aim of this paper is to review the international evidence on the impacts of mortgage interest deductions (MID) on homeownership rates. To understand the relationship between the deductions and ownership rates, we develop a model of housing tenure choice. In that model, the probability of becoming a homeowner is a function of the relative cost of owning and renting, borrowing constraints, household income, and a set of taste variables. The relative cost of owning and renting is a function of house prices and the annual user cost of owner-occupied housing. Tax policies affect the user cost of owner-occupied housing and, in turn, the probability of becoming a homeowner. They also affect the price of housing due to capitalization effects. The empirical evidence suggests that, contrary to popular wisdom, the deduction generally does not increase the ownership rate. This result is likely due to the fact that the MID is capitalized into house prices, especially where housing supply is inelastic.

The low-income single-family house and the effectiveness of architects in affecting affordability

Architects are increasingly engaged in efforts to provide affordable, owner-occupied housing in the United States. Yet architects' roles in broadly addressing affordable housing remain marginal as was anecdotally evident by the absence of architects at a recent university-sponsored affordable housing workshop. Apparently, the potential contributions of architects in "the development of innovative approaches and best practices” related to affordable, owner-occupied housing is not always valued to housing policymakers and planners such as those who organized this workshop. This paper speculatively explores the gap between the potential value of architects and their actual effectiveness at realizing widespread relevancy, innovation, and change in improving the quality and attainability of affordable, owner occupied housing and how this gap may contribute to the undervaluation and marginalization of architects' efforts to address affordable housing needs in the United States. Case studies of several recent U.S. house design competitions exemplify these gaps. Potential strategies for closing these gaps and thus appreciating the value of architects' efforts in this endeavor are identified.To become central in providing much-needed affordable, owner-occupied housing, architects must make the value of their potential contributions evident. This requires a clear definition of design goals, a rigorous assessment of built projects, and the thorough dissemination of findings and methodologies. Architects must engage those fields to which they have, in the U.S., long relinquished affordable, single-family housing. Architects must demonstrate that qualitative design improvements are not just possible within the frameworks and agendas of those other fields but that good design will better enable the achievement of those extra-disciplinary goals.

Wealth Effects Revisited 1975-2012

We re-examine the links between changes in housing wealth, financial wealth, and consumer spending. We extend a panel of U.S. states observed quarterly during the seventeen-year period, 1982 through 1999, to the thirty-seven year period, 1975 through 2012Q2. Using techniques reported previously, we impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regression models in levels, first differences and in error-correction form, relating per capita consumption to per capita income and wealth. We find a statistically significant and rather large effect of housing wealth upon household consumption. This effect is consistently larger than the effect of stock market wealth upon consumption. In our earlier version of this paper we found that households increase their spending when house prices rise, but we found no significant decrease in consumption when house prices fall. The results presented here with the extended data now show that declines in house prices stimulate large and significant decreases in household spending.The elasticities implied by this work are large. An increase in real housing wealth comparable to the rise between 2001 and 2005 would, over the four years, push up household spending by a total of about 4.3%. A decrease in real housing wealth comparable to the crash which took place between 2005 and 2009 would lead to a drop of about 3.5%.

Wealth Effects Revisited: 1978-2009

We re-examine the links between changes in housing wealth, financial wealth, and consumer spending. We extend a panel of U.S. states observed quarterly during the seventeen-year period, 1982 through 1999, to the thirty-seven year period, 1975 through 2012Q2. Using techniques reported previously, we impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regression models in levels, first differences and in error-correction form, relating per capita consumption to per capita income and wealth. We find a statistically significant and rather large effect of housing wealth upon household consumption. This effect is consistently larger than the effect of stock market wealth upon consumption. In our earlier version of this paper we found that households increase their spending when house prices rise, but we found no significant decrease in consumption when house prices fall. The results presented here with the extended data now show that declines in house prices stimulate large and significant decreases in household spending. The elasticities implied by this work are large. An increase in real housing wealth comparable to the rise between 2001 and 2005 would, over the four years, push up household spending by a total of about 4.3%. A decrease in real housing wealth comparable to the crash which took place between 2005 and 2009 would lead to a drop of about 3.5%.

Individual and Area Level Socioeconomic Status and Its Association with Cognitive Function and Cognitive Impairment (Low MMSE) among Community-Dwelling Elderly in Singapore

Background/Aims: Neighborhood socioeconomic status (SES) can affect cognitive function. We assessed cognitive function and cognitive impairment among community-dwelling elderly in a multi-ethnic urban low-SES Asian neighborhood and compared them with a higher-SES neighborhood. Methods: The study population involved all residents aged ≥60 years in two housing estates comprising owner-occupied housing (higher SES) and rental flats (low SES) in Singapore in 2012. Cognitive impairment was defined as <24 on the Mini Mental State Examination. Demographic/clinical details were collected via questionnaire. Multilevel linear regression was used to evaluate factors associated with cognitive function, while multilevel logistic regression determined predictors of cognitive impairment. Results: Participation was 61.4% (558/909). Cognitive impairment was found in 26.2% (104/397) of residents in the low-SES community and in 16.1% (26/161) of residents in the higher-SES community. After adjusting for other sociodemographic variables, living in a low-SES community was independently associated with poorer cognitive function (β = –1.41, SD = 0.58, p < 0.01) and cognitive impairment (adjusted odds ratio 5.13, 95% CI 1.98–13.34). Among cognitively impaired elderly in the low-SES community, 96.2% (100/104) were newly detected. Conclusion: Living in a low-SES community is independently associated with cognitive impairment in an urban Asian society.

Recent dynamics in the Portuguese housing market as compared with the European Union

Abstract.The closing years of the 20th century witnessed profound changes in the European housing market, characterised by an increase in owner-occupied housing; instability of house prices (leading to a serious crisis in some regions, in light of a fall in demand); a change in people’s attitude to the housing market, involving a rise in the importance of location, the quality of materials and spaces, environmental sustainability, and architectural and urban innovation.The European Union does not have a common housing policy, which it believes is the responsibility of Member-States. However, it is recognised that the problems related to the socio-urban inclusion of low-income individuals do have an impact on Community policies.Because we are in the midst of a transformation, it is difficult to talk today about the dynamics and policies of housing, the functioning of markets, and thereby about the ways in which public administrations are facing the current crisis of real estate overproduction.This article aims at analysing the dynamics of the housing market in Portugal as compared with other European countries, highlighting the characteristics of demand and supply and the main changes recorded in the last few years.

Secondhand Smoke and Smokefree Policies in Owner-Occupied Multi-Unit Housing

Studies have documented movement of secondhand smoke (SHS) between units in multi-unit buildings, but none has focused on owner-occupied units in common-interest communities (CICs). In Minnesota, approximately 170,000 households (8%) live in such units. CIC households may experience long-term SHS exposure because owner-occupants typically live in the same unit for many years. This study estimated the prevalence of SHS incursion in CICs and assessed residents' attitudes toward SHS incursions and interest in smokefree policies. A stratified sample of Minnesota CIC owner-occupants was surveyed in 2009, with analysis in 2010-2011. Data were weighted to account for differing sampling, response, and coverage rates by stratum, then calibrated to population control totals for housing type, age, and smoking status. The response rate was 35.6%, with 495 completions. Twenty-eight percent of households reported SHS incursion into their unit in the preceding 6 months; 59% of these said this bothers them a lot. Only 6% report that their CIC has a smokefree policy for residents' units. Forty-two percent would prefer such a policy whereas 26% would prefer smoking-permitted. Sixty-three percent definitely and 17% probably would choose a no-smoking building over a smoking-permitted building if they were buying a new unit, and 46% would be willing to pay more for such a unit. Secondhand smoke incursion is common in CICs, and interest in smokefree CICs greatly exceeds the supply. Given the known health risks of SHS exposure, tobacco control efforts in multi-housing should address CICs as well as rental households.

Testing Home Ownership as the Cornerstone of Welfare: Lessons from East Asia for the West

In recent years, one driver behind the promotion of home ownership in Western countries has been the belief that owner-occupied housing assets provide a means to build up individual welfare security, potentially offsetting pension shortfalls in retirement. In contrast, many developed East Asian societies have both long focussed on advancing ‘asset’ or ‘property-based welfare’ systems as well as experienced the late-1990s Asian Financial Crisis which forced changes in housing and welfare practices. This paper examines how home ownership and asset-based welfare fared in these contexts and the lessons to be learned. It begins by considering the role of owner-occupied housing assets in different welfare regimes before empirically examining how asset-based welfare systems have been realized. It then considers how East Asian home ownership and asset-based welfare systems have stood-up to economic crises. The final section considers what the East Asian experiences contribute to an understanding of the housing assets–welfare relationship.

Permanent and transitory shocks in owner-occupied housing: A common trend model of price dynamics

Significant fluctuations in house prices have received considerable attention in recent years. An understanding of the forces underlying the departure from fundamental values is important in explaining the mechanisms underlying housing market performance and predicting potential house price changes in the future. This study constitutes the first use of a common trend (CT) model to analyze private house prices in the Swedish market. We employ a cointegration system to analyze the macro variables of consumption expenditure per capita, user costs and house prices. We decompose shocks into those resulting from fundamental variables, specified in this research as income and the interest rate, and those resulting from cyclical variables. The results indicate that interest rates play a dominant role in explaining house price swings, and are also significant in determining user costs for households in Sweden. Transitory shocks are found to have little explanatory power for house prices and user costs in the long run. A number of tests have been performed to verify the robustness of the specification and results.

Public mortgage guarantee: instrument to cope with impacts of the financial crisis on the owner-occupied housing market evidence from the Netherlands

The global credit crunch had a deep impact on the mortgage markets in Europe, including the Netherlands. When the credit crunch transformed into a debt crisis, this impact deepened. The impact of the credit crunch and the debt crisis (together: the global financial crisis) on the Dutch housing market is described here. The Dutch government started to react with a stimulating policy but since 2010 austerity measures have become dominant. The National Mortgage Guarantee (NHG) has been applied as an instrument to shelter home-owners against the hardship of the financial crisis. In this paper the role of National Mortgage Guarantee in the Netherlands is analysed. Particular emphasis is placed on the role of this guarantee as an instrument to cope with the impact of the financial crisis on the national owner-occupied housing market. The performance of NHG in 2010 is elaborated. The conclusion is that NHG has made the Dutch owner-occupied housing sector more resilient during the financial crisis.

Housing Careers, Price–Rent Ratios and Rental Equivalence

This paper analyses price–rent (PR) ratios under different housing career structures. A housing market with three segments for owner-occupation and a segment with rental housing is applied. A housing career is characterized by how households move between rentals and owner-occupied housing. While rents are completely passed through to the house price index when rentals represent alternative housing to all forms of owner-occupation, non-constant PR ratios are derived from more realistic housing career structures. In the presence of equity induced up-trading housing markets dominated by family homes are likely to see short-term deviations in PR ratios exceeding those of housing markets dominated by starter homes.

Explaining the Spatial Variation in Homeownership Rates: Results for German Regions

Lerbs O. W. and Oberst C. A. Explaining the spatial variation in homeownership rates: results for German regions, Regional Studies. This paper employs cross-sectional data on ninety-six German regions to investigate the interregional variability of homeownership rates. Among the explanatory variables, the analysis includes important regional housing market indicators as well as regional socio-demographic composition, urbanization and labour market performance. An estimation strategy is chosen which accounts for different forms of spatial dependence between the regional units. It is found that regional differences in the relative price of owning versus renting and the affordability of owner-occupied housing play a key role in explaining why homeownership rates vary so substantially across the country. The results indicate significant neighbourhood effects for several variables.

Going too far in the battle against concentration? On the balance between supply and demand of social housing in Dutch cities

In the second half of the 1990s, Dutch urban housing policy shifted from urban renewal to urban restructuring and the creation of more socially mixed neighbourhoods. Motives for restructuring stem from the ongoing debates on concentration, segregation and social mix. Here, we focus on the main instruments of urban restructuring, that is, the demolition of social housing and the construction of more expensive rental and owner-occupied housing. Continued restructuring may eventually lead to a shortage of social rented dwellings for low-income households, the target group of social housing. An important political question is therefore whether the dwindling supply of social housing still matches the potential demand in the target group. We addressed this question with an analysis of three Dutch cities: Rotterdam, The Hague and Breda. The results indicate that, although demolition has brought about substantial changes, the share of social rented housing remains high in most restructuring neighbourhoods and restructuring has not resulted in concentrations of social rented housing in other, non-restructuring neighbourhoods in any of the three cities. In Rotterdam, which had a very large social housing stock at the beginning of the restructuring operation, there are still sufficient affordable homes for lower income households. However, in The Hague and Breda, restructuring has tightened the supply of social rental housing. The municipal authority in The Hague has attempted to remedy the situation by entering regional agreements to secure sufficient levels of affordable housing.

The distributional effects of pollution regulations: Do renters fully pay for cleaner air?

Changes in housing prices play an important role in determining the incidence of environmental regulations: if the increase in value due to changes in environmental amenities is fully passed forward in the form of higher rental prices, renters may receive no net benefit from the regulations. To estimate the pass-through of the value of an environmental amenity, I exploit the reduction in suspended particulate matter (PM10) due to the 1990 Clean Air Act Amendments (CAAA). Using instrumental variables at varying levels of spatial aggregation I find that the 1990 CAAA led to a significant increase in rents, but the estimated percentage effect is about half as large as that of owner-occupied housing values. Little of this difference is driven by income differences between renters and homeowners; when stratifying by income and comparing the effect of the 1990 CAAA on housing values and rents, point estimates suggest that half of the increase in value is passed on to renters in the form of higher rents. This suggests that pass-through may be incomplete, but landowners still capture much of the value of the air quality regulations.

Medicaid and the housing and asset decisions of the elderly: Evidence from estate recovery programs

I examine the impact of Medicaid on elderly housing and portfolio decisions by using recent state-by-calendar-year level variation in the Medicaid treatment of owner-occupied housing assets from the adoption of Medicaid estate recovery programs. Prior to the adoption of these programs, the house, which represents the most important non-pension asset to the elderly, was exempt from determining Medicaid eligibility and served as both a place of residence and a store of wealth. Adoption of estate recovery programs changed the owner-occupied housing safety net by making the house eligible for recovery by the government, which increased the implicit tax of holding owner-occupied housing. Using data from 1993 to 2004 in the Health and Retirement Study on elderly individuals, I find that state adoption of estate recovery programs makes the elderly decrease homeownership by 4.6%, decrease home equity by 15%, and also decrease the housing share of the elderly wealth portfolio. State adoption of these programs results in elderly baseline homeowners being 33% less likely to own their homes at death and more likely to use a trust as a substitute to housing in order to preserve assets and carry out bequest motives at death.