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Which housing characteristics are important for understanding homeownership rates? How are housing characteristics priced in the rental and owner-occupied markets? And what can the answers to the previous questions tell us about economic theories of homeownership? Using the English Housing Survey, we estimate a selection model of the allocation of properties 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 estimates of rent-to-price ratios and can explain some puzzling correlations between rent-to-price ratios and homeownership rates. These patterns are consistent with, among others, hypotheses of contracting frictions in the rental market likely related to housing maintenance.
Authors
cemmap co-Director University College London
Lars Nesheim is a Professor of Economics at UCL and Co-Director of the Centre for Microdata Methods and Practice (cemmap).
Research Associate Texas A&M University
Jonathan is a Researcher Associate of the IFS and an Assistant Professor of Finance at Mays Business School, Texas A&M University.
cemmap and Sciences Po
Florian is a PhD student with cemmap. His research interests include Applied Microeconomics, Housing and Urban Economics, Labor and Lifecycle Models.
Working Paper details
- DOI
- 10.1920/wp.cem.2020.520
- Publisher
- The IFS
Suggested citation
J, Halket and L, Nesheim and F, Oswald. (2020). The Housing Stock, Housing Prices, and User Costs: The Roles of Location, Structure and Unobserved Quality. London: The IFS. Available at: https://ifs.org.uk/publications/housing-stock-housing-prices-and-user-costs-roles-location-structure-and-unobserved (accessed: 6 May 2024).
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