Housing Affordability and Tenure Choices: an Empirical Investigation

Several empirical studies have established that tenure choice and households mobility decisions are highly correlated (Ozyıldırım et al., 2005). In the literature, there have been two methods that have used to estimate tenure choice models. The first uses a sample of recent movers while the second employs a sample of all households. Other approaches are mixed (Painter, 2000). This work refers on the results of an empirical analysis, developed to the urban level, by a sample of movers (renters and homeowners). The main goal is to test if homeownership is systematically preferred to leasing and if the housing affordability effect can be estimated by a tenure choice model. A random utility approach is used to model observed choices of renters within and between rent and property markets. The analytical results confirm, as expected, the strong trend to the homeownership for the families of renters. But, in current economic situation, the high value of the rent is systematically associated with a reduced chance of changing for the medium-income households. Monetary estimates of affordable rents are given in the last part of the paper, conditioned to the income level, the family size and the previous and actual level of affordability.