Tenure Choice, Housing Demand, and Residential Location

Abstract

This paper incorporates location and tenure choice into a simultaneous equation model of housing demand. The estimation results reveal that an important asymmetry may exist between renters and homeowners in terms of their respective housing decisions. The most important finding in this paper is that for homeowners housing quality and locations are jointly determined. Equally important, the decision process for homeowners appears to be sequential in nature, with tenure choice independent of the housing demand and location decisions. However, this does not appear to be the case for renters. It may be that for tenants location and housing quality choices are more limited than for homeowners.