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Moving and housing expenditure: Transaction costs and disequilibrium

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  • Venti, Steven F.
  • Wise, David A.

Abstract

The paper emphasizes initially the effects of moving transaction costs on the potential effect of government rent subsidy programs. As a concomitant to this analysis, the paper reaffirms the low income elasticities of housing expenditure among low-income renters found by others. Moving transaction costs are high on average among renters in our sample but vary widely between geographic regions and evidently vary a great deal among families as well. By our measure, transaction costs reflect monetary and especially non-monetary gains and losses associated with moving. Moving transaction costs in conjunction with low income elasticities make government lump-sum transfers very ineffective in increasing housing expenditure among low-incomerenters.A dollar of unconstrained transfer payment would increase housing expenditure by only 2 to 7 cents in the two cities in our data set. Minimum rent plans, that make the transfer payment conditional on spending at leasta minimum amount on rent, have larger effects on average than unconstrained transfers. Typical programs might increase rent by 10 to 30 cents per dollar of transfer payment. But families who spend the least on rent a real so those least likely to benefit from the minimum rent programs. To obtain payments under these plans, families who would otherwise spend less than the minimum must surmount the transaction costs associated with moving and must also reallocate income to favor housing in proportions that may be far from their preferred allocations. Thus only a small proportion of families with initial market rents below the minimum will ultimately participate in the programs. And of the total payments to these families, 15 to 32 percent is dead weight loss, according to our estimates. In addition, we find that because moving transaction costs and income elasticities vary widely among regions, the effects of any given government program are also likely to vary greatly from one region to the other.As a fortuitous benef

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 23 (1984)
Issue (Month): 1-2 ()
Pages: 207-243

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Handle: RePEc:eee:pubeco:v:23:y:1984:i:1-2:p:207-243

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Web page: http://www.elsevier.com/locate/inca/505578

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  1. Weinberg, Daniel H. & Friedman, Joseph & Mayo, Stephen K., 1981. "Intraurban residential mobility: The role of transactions costs, market imperfections, and household disequilibrium," Journal of Urban Economics, Elsevier, vol. 9(3), pages 332-348, May.
  2. Friedman, Joseph & Weinberg, Daniel H., 1981. "The demand for rental housing: Evidence from the Housing Allowance Demand Experiment," Journal of Urban Economics, Elsevier, vol. 9(3), pages 311-331, May.
  3. Friedman, Joseph & Weinberg, Daniel H., 1982. "Housing consumption under a constrained income transfer," Journal of Urban Economics, Elsevier, vol. 11(3), pages 253-271, May.
  4. Mervyn A. King, 1980. "An econometric model of tenure choice and demand for housing as a joint decision," NBER Chapters, in: Econometric Studies in Public Finance, pages 137-159 National Bureau of Economic Research, Inc.
  5. King, Mervyn A., 1980. "An econometric model of tenure choice and demand for housing as a joint decision," Journal of Public Economics, Elsevier, vol. 14(2), pages 137-159, October.
  6. Hausman, Jerry A & Wise, David A, 1980. "Discontinuous Budget Constraints and Estimation: The Demand for Housing," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 75-96, January.
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