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The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality

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  • Jonathan Halket

    () (Institute for Fiscal Studies and cemmap and Essex)

  • Lars Nesheim

    () (Institute for Fiscal Studies and cemmap and UCL)

  • Florian Oswald

    () (Institute for Fiscal Studies and cemmap and Sciences Po)

Abstract

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.

Suggested Citation

  • Jonathan Halket & Lars Nesheim & Florian Oswald, 2015. "The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality," CeMMAP working papers CWP73/15, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:cemmap:73/15
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    Cited by:

    1. Allen Head & Huw Lloyd-Ellis & Derek G. Stacey, 2018. "Heterogeneity, Frictional Assignment And Home-ownership," Working Paper 1396, Economics Department, Queen's University.
    2. Brian Adams & Randal Verbrugge, 2020. "Location, Location, Structure Type: Rent Divergence within Neighborhoods," Working Papers 202103, Federal Reserve Bank of Cleveland.
    3. Adam M. Guren & Arvind Krishnamurthy & Timothy J. Mcquade, 2021. "Mortgage Design in an Equilibrium Model of the Housing Market," Journal of Finance, American Finance Association, vol. 76(1), pages 113-168, February.
    4. Robert J. Hill & Miriam Steurer & Sofie R. Waltl, 2019. "Owner-Occupied Housing, Inflation, and Monetary Policy," Graz Economics Papers 2019-05, University of Graz, Department of Economics.
    5. Daniel Levy & Avichai Snir, 2018. "Here Lives a Wealthy Man: Price Rigidity and Predictability in Luxury Housing Markets," Working Paper series 18-16, Rimini Centre for Economic Analysis.
    6. Robert J. Hill & Miriam Steurer & Sofie R. Waltl, 2017. "Owner Occupied Housing in the CPI and Its Impact On Monetary Policy During Housing Booms and Busts," Graz Economics Papers 2017-12, University of Graz, Department of Economics.
    7. Aaron Hedlund, 2018. "Down Payments and the Homeownership Dream: Not Such a Barrier After All?," Working Papers 1806, Department of Economics, University of Missouri.
    8. Carlos Garriga & Aaron Hedlund, 2019. "Crises in the Housing Market: Causes, Consequences, and Policy Lessons," Working Papers 2019-33, Federal Reserve Bank of St. Louis.

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