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User Cost and the Demand for Housing Attributes


  • H. Leroy Gill
  • Donald R. Haurin


A number of studies have related changes in the demand for housing to changes in user cost. All have treated housing as a composite good rather than as a bundle of characteristics. We consider the effect of changing user cost on the demand for the component characteristics of owner-occupied housing, and, given information about the supply of the characteristics, we predict implicit price responses. An empirical test of our model indicates that reductions in user cost result in higher real prices for the non-replicable attributes of housing, examples being location and access to fixed amenities. In contrast, the price of attributes that are perfectly elastic in supply are not affected by changes in user costs. We conclude that the effects of changing user cost are not uniform across housing types and locations, thus generating the appearance of housing submarkets. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • H. Leroy Gill & Donald R. Haurin, 1991. "User Cost and the Demand for Housing Attributes," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 383-396.
  • Handle: RePEc:bla:reesec:v:19:y:1991:i:3:p:383-396

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    References listed on IDEAS

    1. Peter Linneman & Susan Wachter, 1989. "The Impacts of Borrowing Constraints on Homeownership," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 389-402.
    2. Palmquist, Raymond B, 1980. "Alternative Techniques for Developing Real Estate Price Indexes," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 442-448, August.
    3. Richard B. Freeman, 1979. "The Effect of Demographic Factors on Age-Earnings Profiles," Journal of Human Resources, University of Wisconsin Press, vol. 14(3), pages 289-318.
    4. James M. Poterba, 1990. "Taxation and Housing Markets: Preliminary Evidence on the Effects of Recent Tax Reforms," NBER Working Papers 3270, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Donald R. Haurin & Patric H. Hendershott & Dongwook Kim, 1991. "Local House Price Indexes: 1982-1991," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 451-472.
    2. Steven C. Bourassa & Donald R. Haurin & Jessica L. Haurin & Martin Hoesli & Jian Sun, 2009. "House Price Changes and Idiosyncratic Risk: The Impact of Property Characteristics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(2), pages 259-278.

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