Rental Submarket Research Articles

Housing rental submarkets in hedonic regression: econometric arguments and practical application

Housing rental submarkets in hedonic regression: econometric arguments and practical application

A novel approach to examining urban housing market segmentation: Comparing the dynamics between sales submarkets and rental submarkets

Submarket segmentation outlines an essential prerequisite for monitoring housing market and formulating urban housing policies. Although examining segmentation based on a posteriori knowledge rather than a priori knowledge becomes the mainstream, it follows a data-driven approach without a solid theoretical foundation and involves subjective interventions. Additionally, earlier studies have overwhelmingly examined the dynamics of sales submarkets while overlooking those of rental submarkets. This paper demonstrates a novel approach to segmenting the housing market by integrating the hedonic model, geographically and temporally weighted regression (GTWR), and machine learning, and further applies it to unpack the dynamics of sales submarkets and rental submarkets from 2018 to 2020 in Shanghai, China. More specifically, using the home-fixed panel data of housing sales prices and rental prices for each residential quarter, we first establish a series of hedonic models using GTWR and then aggregate the residential quarters into a number of submarkets using an affinity propagation clustering algorithm based on the produced spatiotemporally explicit coefficients. To validate the identified submarkets, we compare them to the static submarkets delineated by the real estate industry with respect to the performances of hedonic models. Finally, the Jaccard and Rand indices are applied to compare the magnitude of spatiotemporal dynamics of sales submarkets and rental submarkets. Results show that hedonic models based on the identified submarkets through our proposed method perform better than those based on the static submarkets delineated by the real estate industry. We also discover that the submarkets present a complex change over three years, especially in central urban areas. The dynamics between sales submarkets and rental submarkets are of significant differences. In particular, rental submarkets are more stable than sales submarkets. Our approach provides a practical and efficient tool for urban housing market segmentation. Our study highlights that differentiated policies should be formulated for regulating sales submarkets and rental submarkets in order to enhance housing affordability.

The private rental housing market before and during the COVID-19 pandemic: A submarket analysis in Cracow, Poland.

How the COVID-19 pandemic has altered the segmentation of residential rental markets is largely unknown. We therefore assessed rental housing submarkets before and during the pandemic in Cracow, Poland. We used geographically and temporally weighted regression to investigate the marginal prices of housing attributes over space–time. The marginal prices were further reduced to a few principal components per time period and spatially clustered to identify housing submarkets. Finally, we applied the adjusted Rand index to evaluate the spatiotemporal stability of the housing submarkets. The results revealed that the pandemic outbreak significantly lowered rents and modified the relevance of some housing characteristics for rental prices. Proximity to the university was no longer among the residential amenities during the pandemic. Similarly, the virus outbreak diminished the effect of a housing unit’s proximity to the city center. The market partitioning showed that the number of Cracow’s residential rental submarkets increased significantly as a result of the COVID-19 pandemic, as it enhanced the spatial variation in the marginal prices of covariates. Our findings suggest that the emergence of the coronavirus reshaped the residential rental market in three ways: Rents were decreased, the underlying rental price-determining factors changed, and the spatiotemporal submarket structure was altered.

Risks and informality in owner-occupied shared housing: to let, or not to let?

In Australian suburbs, due to increasing housing unaffordability, informal shared housing makes up a growing private rental sub-market. At present, there is limited research exploring what dynamics may motivate owner-occupiers to initiate informal shared housing, how informality operates in this rental sub-market and how owner-occupiers with distinct ethnic and cultural backgrounds negotiate informality. Drawing on a qualitative investigation among owner-occupiers of Bangladeshi origin in different suburbs of Greater Sydney, the paper discusses a distinct form of informal shared housing that goes beyond the perceived economic rationality of rent-and-return. What our research reveals is that owner-occupiers also take into consideration the multiple risks involved in the management of these shared housing premises and how the management of these risks results in the limitation of the rental sub-market to specific ethnic communities and social groups. Our findings highlight the importance of considering social and cultural factors in rethinking the notion of home in these non-normative housing sites. We conclude with some suggestions about policy interventions that may be able to recognise the underlying logics of informal housing tenures that are informed by cultural perceptions of risk on the part of owner-occupiers.

Eviction and Segmented Housing Markets in Richmond, Virginia

ABSTRACT This article examines the relationship between housing market segmentation and eviction in Richmond, Virginia. Housing market segmentation conceptualizes housing consumption through multiple distinct submarkets instead of a unitary regional market. To examine the production of housing segmentation we rely on an original large-building database for all multifamily buildings in Richmond with more than 25 units, which we complement with qualitative interviews with more than 25 Richmond tenants who have experienced at least one eviction. Our analysis makes three key contributions. First, by placing two different scholarly traditions in conversation—urban economics and critical urban political economy—we foreground the importance of understanding what institutions and actors create and maintain submarkets. Second, the article takes a novel methodological approach to segmentation by analyzing ownership of rental housing and tenant experience. Finally, these approaches allow us to move beyond framing eviction as simply a feature of some rental submarkets and to pose the question about what role eviction plays in creating and maintaining submarkets and class-monopoly rents. We offer evidence that through eviction and the threat of eviction landlords create targeted housing scarcity for specific groups of tenants. We argue for understanding eviction as a formative institution of housing submarkets.

Urban widows: living and negotiating gendered dispossession in speculative slum housing markets in Mumbai

The paper draws out the social and political struggles of everyday practices in slum neighbourhoods and the diverse strategies adopted by widows who are under threat of dispossession (the action of depriving someone of land, property home or other possessions). Insights are offered into how speculative processes have resulted in diversity of arrangements for home ownership and in the rental submarket. The perspectives of widows contribute to understanding how speculative urbanism and gentrification change social relations within poor households, particularly the relevance of changing inter-generational relations. Multi-scalar politics over the threat of insecurity and gendered dispossession are explored further by using the stories of elderly widows in a slum. Emphasis is put on their resilience, drawing on their own meagre resources and innovative strategies, aggravated by the city’s changing demographic, political and socioeconomic landscape. The discussions highlight how intergenerational transfers are negotiated, and how poor widows in slums engage with these complex arrangements. Overall, the paper highlights the relationship between an ageing population and urban poverty. Feminist geographical perspectives are crucial in understanding how neoliberal development has created ongoing gendered dispossession experienced on axes of differences (age, class, gender and poverty), which are constantly negotiated, contested and reworked and highlight gendered marginalisation.

Rent dynamics in France between 1970 and 2013

PurposeThe purpose of this study is to highlight the determinants of market rents and to build a hedonic market rent index for each urban area and rental sector in France for the period 1970–2013. The authors also analyse the market rent dynamics over this period, with a special attention to the turning points in the French housing policy.Design/methodology/approachFor this purpose, the authors implement a hedonic model, called stratified time dummy variable, using the Box–Cox transformation as a functional form.FindingsThe contribution of this study to the housing research is threefold: First, the study improves our understanding of the French’s rental submarket specificities and their valuation. It sheds new light on the determinants of rents. Second, this study builds a hedonic market rent index over the period 1970–2013 for each geographical and sectoral segment (Paris urban area, urban areas of more and less than 100,000 inhabitants and private and public rental sectors). Third, this study explains rent dynamics focusing on the turning points in the French housing policy.Originality/valueFinally, the authors provide the first long-term market rent index in France by submarket (geographical and sectoral). In the case of the French market, no long-term market rent exists. The only long series available is an indexed rent.

Shared Room Housing and Home: Unpacking the Home-making Practices of Shared Room Tenants in Sydney, Australia

ABSTRACT Shared room housing is a growing private rental submarket, which offers flexible and affordable rental sub-lettings for sharing a bedroom or living room with non-related tenants. However, research exploring the living experiences and home-making practices of shared room tenants is sparse. Drawing on an empirical base of shared room housing experiences in Sydney (online survey n = 103, in-depth interviews n = 35), this paper provides insights on how these residents strive to achieve the material, social and emotional elements of home while dealing with insecure occupancies and maintaining multiplex relations with non-related roommates and housemates. In response to shifting spatial, material and social configurations, home in shared room housing emerges as an ever-changing process of (re)making and unmaking.

Urban and Peri-Urban Residential Rental Markets in Wallonia: Similar or Different?

Residential rents are analysed in the Walloon region in Belgium. In this region, affected by urban sprawl, households rent accommodation in urbanised areas as well as in their peripheries. While there is no statistical difference between the average observed rents per square meter in urban agglomerations and suburbs, does it mean that these areas compose a single market with identical rent determinants? Or that the same level of rents is determined by different drivers? The paper analyses the regional territorial structure and aims at determining the geographical rental submarkets based on urban / peri-urban delimitation. Traditional ordinary least squares (OLS) and geographically weighted regression (GWR) techniques are applied. With the latter method, the spatial autocorrelation in the residuals decreases, but remains significant. Particular attention is payed to the spatial distribution of the GWR coefficients. The Chow test and the weighted standard error provide an evidence of the existence of spatial-structural submarkets in the agglomerations and in the peri-urban areas in the biggest residential urban complexes of the region. The calculated market rent of a hypothetical standardized dwelling reveals a substantial dissimilarity between two areas: the rent of a typical dwelling is higher in peri-urban zones, up to 43.5% according to the OLS and up to 17.7% according to the GWR. With more recent dataset, we found that this tendency, which contradicts the classical urban theory, increases in time.

Housing market filtering in the Oslo region: pro-market housing policies in a Nordic welfare-state context

Vacancy chain theory suggests that mobility opportunities spread within and between specific states, typically flowing from attractive to less attractive units, with households moving in the opposite direction. We explore whether such welfare gains apply in a context, the Oslo region, which combines egalitarian welfare programmes and pro-market housing policies. We use merged census and register data from 2011, and include all events that initiate vacancies. Our results show that rental submarkets function poorly. There are many vacancies, but most of them are immediately absorbed by recruits, that is, households who leave no vacancy behind. Opportunities for disadvantaged groups are further reduced by rapid absorption of owner-occupied flats, often because privileged nest-leavers eschew the rental markets. Two related outcomes are segmentation between submarkets and segregation between Oslo Outer East and the remaining city. All of these adverse consequences reflect the costs of current policies, and call for initiatives that increase and improve opportunities in the rental sector.

Room Sharing in Sydney: A Complex Mix of Affordability, Overcrowding and Profit Maximisation

ABSTRACTThe shared housing sector is a growing private rental submarket. Researchers have sought to analyse the drivers of this growth, the benefits of shared housing for tenants, landlords and wider urban systems, as well as risks for tenants and local planning systems. Yet, there is limited research exploring the diversity of the shared housing sector. In particular, analysis of room or space sharing with non-related adults is lacking. This paper explores the characteristics, geography and impact of room sharing across Sydney. By analysing online accommodation listings this paper provides insights for policymakers seeking to monitor and regulate shared room accommodation.

Warehouse rental market segmentation using spatial profile regression

Warehouse rental markets can be segmented into multiple submarkets in which rental storage units share similar structural characteristics in that they are reasonably close substitutes for one another with their geographical proximity. Improved understanding of warehouse rental market segmentation enables warehouse owners to effectively formulate marketing strategies and warehouse renters to reduce search costs. Previous studies either assumed a priori submarkets or used cluster analysis to delineate submarkets based entirely on the similarity of rental prices. However, such approaches have limitations in addressing associations between warehouse rents and their determinants because of the potential spatial autocorrelation and multicollinearity in warehouse rent data sets. In the present study, we address the gap in the literature by introducing a method known as Bayesian spatial profile regression for warehouse rental submarket segmentation. This approach allows us to assess meaningful relationships between warehouse rents and their determinants as a unique profile for each submarket, while accounting for spatial autocorrelation in warehouse rents and multicollinearity among their determinants. In a case study, we demonstrated an application of spatial profile regression to a warehouse rent data set for the Seoul Metropolitan Area (SMA) of South Korea and identified two submarkets: high-rent and low-rent groups. The high-rent group was strongly associated with proximity to the urban center in Seoul and Incheon Port, higher floor area ratio, relatively older building age, higher land price, transportation, and automated warehousing services. The associations for the low-rent group were the opposite of the high-rent group and featured proximity to industrial complexes away from the urban center. The results reflected the highly polarized segmentation of the warehouse rental market in the SMA.

Affordability After Subsidies: Understanding the Trajectories of Former Assisted Housing in Florida

Each year, thousands of units are lost from the assisted rental housing inventory through deterioration and default, subsidy expiration, and market-rate conversion. While a good deal of research and data collection has focused on identifying at-risk developments, less is known about what happens to former assisted developments after they exit income and rent restrictions. This article uses a survey of former assisted properties in Florida to identify their postsubsidy trajectories—that is, as to whether developments continue as rental housing, are converted to condominiums, or leave the housing stock through vacancy and demolition; and for those that continue as rental housing, whether they continue to offer affordable rents. Using logistic regression models, the article examines the property, housing market, and neighborhood characteristics that determine these trajectories. The results show that smaller properties, those that have been out of subsidy programs longer, and those in stronger neighborhood housing markets are more likely to be converted to condominiums. Among developments that continue as rental housing, those that previously had more stringent rent restrictions, those in strong rental submarkets, and those with better transit access tend to become unaffordable compared with previous rent limits.

Housing demand and housing policy in urban Bangladesh

This paper estimates demand for housing and its attributes in urban Bangladesh using a survey of 4400 owner, renter and squatter households. The results revealed that housing demand is inelastic with respect to income and price; and price elasticity is less than income elasticity in absolute terms. Estimates of demand for housing attributes showed that owner and renter households value structural quality, sanitation and electricity, as well as a living room and dining room/kitchen. Squatter households value living space, pit latrine, water supply and electricity, but place less emphasis on structural quality. Irrespective of these submarkets, income improvement strategies are likely to be the most effective means of enhancing housing consumption. The rental submarket might be improved by rent liberalisation, while slum improvement strategies should focus on tenure security and incremental improvement. However, contrary to current practice, the emphasis should be on the size of squatter dwellings rather than on their structural quality.

Rental Amenities and the Stability of Hedonic Prices: A Comparative Analysis of Five Market Segments

The current paper applies the hedonic approach to five rental submarkets in the Quebec region, namely Quebec City, Vanier, Ste-Foy, Beauport and Charlesbourg. The databank consists of information o...

Implicit pricing across residential rental submarkets

This paper examines implicit price differences of rental housing characteristics across various property types to measure whether determinants of rents are valued in the aggregate or separately. The results show that hedonic price functions are not identical across property types, which suggests that ordinary least squares is not the appropriate estimation technique when modeling the implicit prices for an aggregate rental market. Generalized least squares estimation of a random coefficient model removes the restriction of fixed parameters imposed by OLS and allows estimation of implicit prices for rental markets containing multiple property types.

Unravelling the Residential Rent-Value Puzzle: An Empirical Investigation

This paper tests empirically whether observed variation in the relationship between residential rents and housing prices in US metropolitan areas during the 1974-79 period can be attributed to differences in the user cost of residential capital. Consistent with user cost models, house values are found to be high relative to market rents where real after-tax financing costs are low and where expected capital gains from appreciation are large. At the same time, high rental vacancies, lagging rents and high inflation rates per se also are found to raise structure prices relative to market-clearing rents, suggesting significant adjustment lags from the durability of the housing stock, transaction costs, and segmentation between owner and rental submarkets.

Financial Tradeoffs and Landlord Participation in the Section 8 Rental Assistance Program

Abstract This article examines an issue that has significant implications for the viability of the Section 8 Rental Assistance Program: the balance between the program's financial costs and benefits to participating landlords. Using two case studies and a sample survey of St. Louis-area landlords, I analyze financial tradeoffs within the context of the broader marketplace for low-income urban housing. The primary findings are that (1) Section 8 units cost more to repair and maintain than comparable market-rate units, chiefly because of housing authority code enforcement and the character of the tenant clientele; and (2) although they vary among neighborhoods, Section 8 rents generally compensate for the added maintenance and repair costs. At the end of the article I examine cost differences across rental submarkets and discuss implications for housing administrators and planners.

The influence of racial segregation on housing prices

Census tract data were used to investigate the influence of racial segregation on housing prices in the Oakland, California housing market. White renters were found to pay a premium to live in segregated neighborhoods. Racial differences in the implicit prices of specific housing characteristics were also observed in the rental market: a unit of housing space was more expensive in the black rental submarket, while a unit of housing quality cost more in the white rental submarket. No significant differences were found in the prices paid by black and white homeowners, although for methodological reasons these results were less reliable than those for rental housing.