Renting

About: Renting is a research topic. Over the lifetime, 4699 publications have been published within this topic receiving 55947 citations. The topic is also known as: hiring & letting.

Owner-Occupied Housing and the Composition of the Household Portfolio

Abstract: For most homeowners, the house is the single most important consumption good appearing as an argument of the utility function, and, at the same time, the dominant asset in the portfolio. This paper uses a mean-variance efficiency framework to examine the household’s optimal portfolio problem when owner-occupied housing is included in the list of available assets. Housing differs from stocks and bonds in a crucial way: since the household’s ownership of residential real estate determines the level of its consumption of housing services, the household’s demand for real estate is “overdetermined” in the sense that the level of real estate ownership which is optimal from the point of view of the consumption of housing services may differ from the optimal level of housing assets from a portfolio point of view. With rental markets for housing, a household can, in principle, divorce the size of its holdings of real estate assets from the level of housing services it consumes. However, rental housing is by no means a perfect substitute for owner-occupied housing. We assume, instead, that the preferential tax treatment of owner-occupied housing and the transactions costs and agency costs involved in the rental market for housing create frictions large enough to effectively constrain the household to include in its asset portfolio the level of housing consistent with its consumption of housing services. The paper focuses on the impact of the portfolio constraint imposed by the consumption demand for housing on the household’s optimal holdings of financial assets. Section II of the paper is similar in spirit to a recent paper by Jan K. Brueckner (1997), which analyzes the interaction between the consumption demand and the investment demand for housing in a mean-variance portfolio model. Brueckner considers a general covariance matrix and mean vector of returns and a general utility function, and derives analytical results. In contrast, our implementation of the meanvariance framework is quantitative. That is, we estimate the covariance matrix and vector of expected returns for housing and financial assets and solve for the efficient frontiers and optimal portfolios numerically. The risk characteristics of housing are estimated using two distinct sources: data from the Panel Study of Income Dynamics (PSID) and data from Karl E. Case and Robert J. Shiller (1989) based on repeat sales transactions prices for four U.S. cities. Both data sources indicate that housing prices have a large idiosyncratic component; the standard deviation of the return to housing, at the level of the individual house, is about 0.14. In addition to housing, the portfolio can include nonnegative amounts of Treasury bills, Treasury bonds, and stocks. The household can borrow only in the form of a mortgage, which is limited to 100 percent of the value of the house. Using the estimated vector of expected returns and covariance matrix of asset returns, we plot the constrained meanvariance efficient frontiers for various values of the household’s ratio of house value to wealth, h (the “housing constraint”). The housing constraint has an enormous effect on the risk and return trade-off available to the household. Young households, which typically have large holdings of real estate relative to their net worth, are highly leveraged and therefore forced into a situation of high risk (and return). As a result, these young households have a strong incentive to reduce the risk of their portfolio by using their net worth to either pay down their * Flavin: Department of Economics, University of California, San Diego, CA 92093, and National Bureau of Economic Research (e-mail: mflavin@ucsd.edu); Yamashita: Department of Economics, University of Nevada, Las Vegas, NV 89154 (e-mail: tyamashi@ccmail.nevada.edu). We thank Elena Bisagni, Jan Brueckner, Wouter den Haan, James Hamilton, Bruce Lehmann, Greg Mankiw, and the referees for comments, and Robert Shiller for providing the house price transactions data. 1 The implications of the dual role of housing (as both a consumption good and an investment good) for tenure decisions of households were first analyzed by J. Vernon Henderson and Yannis M. Ioannides (1983).

The Effects of Different

Abstract: This article uses administrative data on nonelderly, nondisabled households that received U.S. Department of Housing and Urban Development rental assistance between 1995 and 2002 combined with data from other sources to estimate the effect of low-income housing programs on these households'labor earnings and employment. Using longitudinal data to explain the change in these measures of market labor supply makes it possible to account for immutable, unobservable household characteristics that are determinants of market labor supply and correlated with program participa tion. Employing a large random sample of households throughout the country makes it possible to produce estimates of the national average effect of each type of housing assistance. Using administrative data makes it possible to identify accurately the type of housing assistance received. The results indicate that each broad type of housing assistance has substantial negative effects on labor earnings that are somewhat smaller for tenant-based housing vouchers than for either type of project-based assistance. They also suggest that participation in the little-used Family Self-Sufficiency program, an initiative within the public housing and housing voucher programs to promote self-sufficiency, significantly increases labor earnings.

Optimal Consumption and Portfolio Choices with Risky Housing and Borrowing Constraints

Abstract: We examine the optimal dynamic portfolio decisions for investors who acquire housing services from either renting or owning a house Our results show that when indifferent between owning and renting, investors owning a house hold a lower equity proportion in their net worth (bonds, stocks, and home equity), reflecting the substitution effect, yet hold a higher equity proportion in their liquid portfolios (bonds and stocks), reflecting the diversification effect Furthermore, following the suboptimal policy of always renting leads investors to overweigh in stocks, while following the suboptimal policy of always owning a house causes investors to underweigh in stocks For many investors, a house is the largest and most important asset in their portfolios The 2001 Survey of Consumer Finances (SCF) shows that about two-thirds of US households own their primary residences and home value accounts for 55% of a homeowner’s total assets, on average At the same time, approximately 50% of US households hold stocks and/ or stock mutual funds (including holdings in their retirement accounts), and stock investment accounts for less than 12% of household assets Even for households owning stocks, they account for less than 40% of household assets Housing differs from other financial assets in that housing serves a dual purpose It is both a durable consumption good from which the owner derives utility and also an investment vehicle that allows the investor to hold home equity Further, compared with other financial assets such as bonds and stocks, the housing investment is often highly

Real estate search and location system and method

Abstract: There is provided a method for locating available real estate properties for sale, lease or rental using a database of available properties at a central location and remote stations which use a graphic interface to select desired regions on a map of the areas in interest. The user begins with a region where they are interested in acquiring property and select an inner area within this region by using a pointing device such as a mouse to designate boundaries on a map displayed on screen. This is then zoomed in on and a second area is selected within the zoomed region. The second area is then cross-referenced with the database of available properties whose approximate locations are then pictorially displayed on screen. Information about the properties can then be obtained in textual form.

Households and Housing: Choice and Outcomes in the Housing Market

Abstract: Residential relocation is the household decision that generates housing consumption changes. It is not merely a decision about changing locations; it is also a decision about tenure-about whether to own or to rent. Research into housing markets has been largely focused on the process of changing from renting to owning, as most countries in the Western world have moved from predominantly rental societies to societies of homeowners. Households and Housing is designed to demonstrate the interconnections between the housing stock and households. The focus is on understanding the demand for housing and the way in which the demand is fulfilled as households select housing. This book is concerned with both the decision to move one's residence and the resulting type of housing choice. The housing supply-the stock of dwellings-is the context within which households make choices and acquire housing. The authors use the concepts of life course, housing career, and housing hierarchy to trace the movement of households through the housing market. They paint a comprehensive picture of housing consumption by age, income, and tenure choice, illustrated with nearly 150 figures and tables. US housing market data are contrasted with data from the Netherlands to document the differential effects of government intervention. This is the most up-to-date analysis available on the dynamics of housing choices and housing markets.