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Using the English Housing Survey, we estimate a supply side selection model of the allocation of properties to the owner-occupied and rental sectors. We find that location, structure and unobserved quality are important for understanding housing prices, rents and selection. 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. We interpret this as strong evidence in favor 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.2015.7315
- Publisher
- cemmap
Suggested citation
J, Halket and L, Nesheim and F, Oswald. (2015). The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality. London: cemmap. Available at: https://ifs.org.uk/publications/housing-stock-housing-prices-and-user-costs-roles-location-structure-and-unobserved-0 (accessed: 2 May 2024).
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