The Housing Stock, Housing Prices, and User Costs: the Roles of Location, Structure, and Unobserved Quality

Jonathan Halket (1, 2) , Lars Nesheim (3) , Florian Oswald (4)

1 University of Essex
2 Texas A&M University System
3 UCL - University College of London [London]
4 ECON - Département d'économie (Sciences Po)

Which housing characteristics are important for understanding homeownership rates? How are housing characteristics priced in rental and owner-occupied markets? What can answers to these questions tell us about economic theories of homeownership? Using the English Housing Survey, we estimate a selection model of property allocations to the owner-occupied and rental sectors. Structural characteristics and unobserved quality are important for selection. Location is not. Accounting for selection is important for rent-to-price ratio estimates and explains some puzzling correlations between rent-to-price ratios and homeownership rates. These patterns are consistent with, among others, hypotheses of rental market contracting frictions related to housing maintenance.

Domains: Humanities and Social Sciences; Economics and Finance

Jonathan Halket, Lars Nesheim, Florian Oswald. The Housing Stock, Housing Prices, and User Costs: the Roles of Location, Structure, and Unobserved Quality. International Economic Review, 2020, 61 (4), pp.1777-1814. ⟨10.1111/iere.12475⟩. ⟨hal-03799462⟩