The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality

November 2020 | Halket, Jonathan

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.

Author

Co-author(s)

  • Lars Nesheim
  • Florian Oswald

Publication(s)

International Economic Review

Web Link

https://onlinelibrary.wiley.com/doi/10.1111/iere.12475