Three essays about housing issues in new contexts: demand for housing attributes, housing price indices, and location choices under displacement
As a society we have devoted much resources and effort to understand the different dimensions of housing and its effects on human life. The concern of housing as an important keystone of social life dates back to the very initial stages of the Neolithic revolution where nomads turned into sedentary tribes because they understood the importance of having a shelter, not only because it was the best way preserve life, but also because it provided social status and sense of belonging (Kerbo, 1999). Even in those times, housing was a defining factor when understanding differences in wellbeing among tribes. Today it is certainly true that we keep seeking the satisfaction of those very basic housing needs, and we keep facing similar challenges when comparing the access to housing across the different sectors of our society. Additionally, today we also face a modern world full of changes and complexities that have been translated the way we do research to explain the role of housing in our economic and social life. Inspired by this changing nature, I have explored how our understanding about certain housing issues changes depending on the context. In particular, I present three essays that provide a new perspective of well known housing issues such as the role of attributes on the demand for housing, the estimation of housing price indices, and the revealed preferences on residential mobility and location choice. In these three essays I provide new evidence by applying well-established methods to a different spatio-cultural context, more spatial-disaggregated units, and specific constrained situations respectively. All together, the evidence presented here highlights how our understanding of the aforementioned housing issues changes contingent to the current context. In chapter one, I estimate the demand for housing attributes using the case of Chile –a developing economy in South America. This chapter provides evidence about the role housing attributes play on the demand for housing, highlighting that Housing Size and Housing Location are basic necessities contrary to Housing Quality and Housing Features that are considered as luxury goods when exploring the effects of income changes on the demand for these housing attributes. Along chapter one I argue that this information is key in a country where the reduction of income inequality is a priority on the political agenda, because those attributes revealed as necessities should be prioritized when designing subsidies. I also argue that this study is not only relevant for the case of Chile, but for other developing economies that have seen Chile as a example to follow when designing their own housing policies. Agreeing with this last claim, the Lincoln Institute of Land Policy provided financial support pursuing this research, for which I am thankful. This research is now on the stage of getting approval to be submitted for publication. Chapter two contributes with evidence that argues for a closer look when tracking housing prices. In particular, I argue against currently used methodologies estimating housing price indices, which assume that having a single price index for the biggest metropolitan area is a sufficient indicator to make judgments of the housing market behavior at higher aggregation spatial units such as states or cities. In contrast to this notion, this chapter applies the methodology originally proposed by (McMillen, 2012) to the case of 10 Metropolitan Statistical Areas (MSAs) in the state of Illinois, showing that although the biggest housing market in a state is in depression there could be others that are flourishing within the same state. This finding challenges the way we understood the leader-follower economic relationship between big and small metropolitan areas respectively. Additionally, this paper provides an alternative and more accurate way to track housing prices in small spatial units. When comparing the proposed price index with the traditional mean-based index, significant differences arise due to the fact that the latter do not control for changes in housing characteristics as the index I propose index does. Finally and to show the full extent of this methodology, an additional section will be added including the estimations of the proposed housing price index at the community level for the city of Chicago. Same as in the case between MSAs in Illinois, the results are expected to challenge the assumption of a single price index for the city as a whole, showing the natural variation in housing prices across the different housing markets within the city. Chapter 3 analyzes residential mobility and location choice within the framework of the increasingly recurrent urban renewal phenomenon. Although neither residential mobility nor urban renewal processes are new issues, I claim that there is a literature gap regarding the analysis of the potential outcomes of households under displacement conditions. This study takes advantage of data purchased from InfoUSA on address changes of residents in Champaign County to be able to identify residential mobility from one period to another. Along with individual-level variables defining financial and demographic situation of a household and its members, we use housing and neighborhood characteristics to conduct our analysis. After conducting exploratory analysis on the data, the proposed method contemplates first estimating a discrete choice model of residential mobility and location choice on the sample as a whole capturing the dynamics and mobility patterns in normal conditions. Later and based on this model, we estimate the potential outcomes using the data on those households to be displaced, hence obtaining their potential outcomes in terms of location choices, access to job centers, and social services. Finally we re-estimate the model on other similar displacement situations to evaluate the accuracy of our predictions on a situation that has already occurred. All together, this paper contributes with a powerful evaluation tool for potential outcomes due to housing displacement in a context of urban renewal. Combined, these three essays highlight that our current social and economic conditions could either challenge our previous believes about the housing market, or pose new levels of complexity demanding more specific analysis than we previously ignored or assumed unnecessary.
Housing, Housing Price Indices, Small Metro Areas, Chile, Housing Demand, Housing Choices
University of Illinois - Urbana-Champaign
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University of Illinois at Urbana-Champaign