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Housing structure attributes and tenure status.

Kirk Kaneer"Housing Structure Attributes and Tenure Status," presented at the Allied Social Science Associations Annual Meetings, Society of Government Economists, Chicago, IL, December 28-30, 1987.

Are structural attributes of dwellings major factors related to whether a consumer owns or rents his or her housing? This is an important question because shelter costs form the largest budget item for most consumers and, from an econometric viewpoint, failing to account for structural attributes of dwellings found in the general housing stock may result in specification bias when estimating tenure model parameters. However, the primary purpose of this study was to examine the contribution of structural attributes as a group of explanatory variables in housing tenure models. It was found that housing tenure is significantly related to the structural attributes of the dwelling. This result was unexpected given that in standard economic models consumer characteristics alone explain housing tenure.

There are four major reasons why structural attributes should be included in a descriptive tenure model. First, the greater the housing density, the greater the need for controlling occupant abuse and congestion externalities. Given that renting provides means of controlling occupant behavior, a relationship exists between housing density and tenure. For example, a landlord may be more willing to rent out an adjoining duplex than to sell, preferring to retain greater control over its occupants. Second, maintenance cost may depend upon the tenure of the dwelling. It could be argued that the size of this maintenance cost would be a function of the kinds and amounts of structural attributes present-for example, the more rooms, the larger the maintenance cost differential between owning and renting the unit. If differences in maintenance costs between homeowners and renters are greater in single-unit structures than in multi-unit structures, one would expect the probability of ownership to be higher in the single-unit structures. Third, maintenance costs are tax deductions for landlords but not for homeowners. If maintenance costs vary by structural attributes, there is an added tax effect in the tenure relationship. Fourth, legal restrictions, such as local zoning laws limiting structure or tenure type, may prohibit certain structures from being rented or subdivided and thereby affect the prevailing tenure status. Given these reasons, a model of observed tenure should include a vector of structural attributes describing the building as well as a vector of socioeconomic characteristics describing the occupants.

For the empirical analysis, the dwelling is characterized by a number of structural attributes, such as the number of rooms, structure type, structure age, housing density, and degree of urbanization. It was hypothesized that the structural attributes of a dwelling, with a vector of socioeconomic characteristics of its occupants serving as control variables, would be significantly related to the observed tenure of the dwelling. Three binomial logit models were specified and tested using 1984-85 Consumer Expenditure Survey data. The first model included both socioeconomic and structural attribute variables. The socioeconomic variables included the log of income, the log of income squared, age of the reference person, age of referenced person squared, and a set of dummy variables describing family type, log of a wealth variable, a set of education variables, and dummy regressors based upon new residences established within the past 3 months. These last three regressors were included to proxy consumer units' mobility, based upon distance moved from their previous locations. Race, observation quarter, and unemployment income dummy variables also were included as controls. The housing attribute variables were chosen to reflect housing density, economies of scale, congestion externalities, structural age, size, and degree of urbanization. The second model included only socioeconomic variables, while the third model included only structural attributes. The sample included only consumer units having their final interview conducted during 1984 and 1985. This eliminated multiple occurrences of the same consumer units brought about by rotating sample design, while also including income and asset data which were available only from the fifth interview questionnaire. The sample was further limited to consumer units giving valid income and wealth information, those not receiving government housing support, those not receiving housing on a noncash basis, and those giving valid structural attribute and mobility responses. This left 4,518 observations for analysis.

The null hypothesis that structural attributes do not make a contribution was strongly rejected. Log likelihood statistics indicated that the model that included both structural attributes and consumer characteristics significantly outperformed the models with consumer characteristics or structural attributes alone. This suggests that housing research, especially models utilizing occupant tenure, should further examine structural attribute influences.
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Title Annotation:Consumer Expenditure Survey Conference paper summaries
Author:Kaneer, Kirk
Publication:Monthly Labor Review
Date:Aug 1, 1988
Words:750
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