GGR 357 H1F
Geography of Housing and Housing Policy
May 14, 2008SESSION 2
TENURE CHOICE AND SOCIO-ECONOMIC INEQUALITIES
DR. AMANDA HELDERMAN
Course web page
http://individual.utoronto.ca/helderman/
Announcements
Text book sale $15.00 Exact change only
Room 50.57– Additional opportunities?
Assignment
• Individually written, unique research paper• Demographics and housing issues in Torontonian
neighbourhoods • Immediately relevant topic to this course: Homelessness -
extremely wealthy neighbourhood: Not appropriate choice of topic for obvious reasons
• Do not exceed 1,500 words!• Hard copy and digital copy (word only)
• ALL RELEVANT LIT SHOULD BE USED!
• DUE DATE PAPER: Friday, June 20, 2008• Drop box Office of Geography/ Program in Planning• Name student, student number, my name, course
Assignment
• The paper should at least describe the demographic, socio-economic and physical characteristics of the area
• Demographic and socio-economic characteristics of the neighbourhood: http://www.toronto.ca/demographics/
• Physical characteristics of the area: map
• Writing courses • Be aware of waiting times! Contact the writing centre ASAP
• Assistance from instructor (at least two weeks in advance):
• By providing 1-page draft outline well in advance of appointment after class
• By appointment after class• By email: [email protected]
Assignment
Paper preparations: very wise of you to start exploring paper themes!
Assignment description available online
Please embed all maps/ tables into the paper
Appropriate attention in the text
Use of appendices (if useful background information)
Illustrations for required elements such as physical structure (maps) and demographic characteristics (tables)
Timelines
MIDTERM EXAM: Monday June 2, 2008, this room
DUE DATE PAPER: Friday, June 20, 2008– Drop box Office of Geography/ Program in Planning– Name student, student number, my name, course
June 23-27, 2008: FINAL EXAMINATIONS: – Exact date to be announced
Highlights from first session
Several slides are worth revisiting Summary first session:
– Definition of housing, complexity concept– Importance of housing– Modelling housing market behaviour
Defining Housing
Complexity of housing: all alternative definitions are applicable at the same time, some meanings are separated and confused
Broad definition: BUNDLE OF SERVICES (for builders, owners and renters)– Physical facility– Shelter– Consumption of services: public, schools,
environment, etc.– Location/ accessibility
The services delivered by housing
Access to/ occupancy of housing delivers:
1. Shelter from the elements2. Value/ wealth equity for owners3. Shelter from ‘taxes’ e.g. capital4. Accessibility to services (e.g. schools)5. Accessibility to work6. Accessibility to neighbourhood7. Social status8. Right to privacy/ exclusion
Role of location!
Services…
The importance of housing
Housing is the built environment for intraurban migration and mobility
Housing competes with other uses in the urban land market for accessibility and space
Housing is the principal mechanism through which urban neighbourhoods change, and one of the stimulants of change (session on neighbourhood transitions)
– Moves of households/ activities, demographic change– New (demographic/ economic/ social/ cultural)
developments– Aging of real estate– Fluctuations in house prices
Models for housing market behaviour
Traditionally in terms of streams of relocations, and origins and destinations (aggregate patterns):
Gravity models – based on the characteristics of places– Size and distance between places
Push/pull models – based on flows of individuals, decisions
(Recurrent) Markov Chains – based on matching process between households and housing
Two more recent approaches:
Micro-economic approaches (Sjaastad) – based on the costs and returns of human migration (monetary and non-monetary costs)
Life cycle/ Life course perspective – based on life events that trigger a change in one of the parallel careers, individual and micro-economic
Life course, parallel careers
Child birth
HH
LB
ED
HS
Cohabitation
Enrolling into higher education
Child birth
Job change Job change
Divorce/ separation Remarriage
Widowhood
Life course: paradigm shift in the social sciences
Convergence of theory and empirical work Devoted attention to the individual household Brought the topic of residential relocations into the
centre of housing studies
Linking individual action with social change and social structure
Demographic events introduced as milestones and critical transitions in people’s lives
UNIVERSAL: these events apply for almost everyone, and occur everywhere and throughout history
Introduction housing tenure (new topic)
Housing tenure choice
Individual advantages/ disadvantages to homeownership
Socio-economic inequalities
Separate markets
Mechanisms of widening socio-economic gaps
Introduction
Advantages of homeownership for governments
Policy instruments
Literature discussion
Housing tenure choice
2nd step in the relocation decision (see Brown & Moore, 1970) Destination choice models Life course stage Household composition and socio-economic
characteristics Housing type Level of housing consumption Opportunity structure:
– Local housing stock– Local housing market conditions
The values of housing
Consumption value
Investment value
Policy importance
Means-end modelBasic needs
Values
Goals and objectives
Intentions
Choice behaviour
Household characteristics
Current situation
Values and consequences
Value
Consequence
Attribute
Privacy
More space
Five rooms
Housing tenure and the life course
Some rent while being young…
… while others need rental housing throughout their lives.
Individual advantages to homeownership
Building up equity from a home Housing quality Customized aspects/ alterations Control of individual housing situation/ independence Continuity/ stability Status Emotional value
Individual disadvantages to homeownership
Financial risk: housing market Financial risk: labour market position Responsibility for maintenance Impedes residential relocations:
– Financial commitment– Transaction costs– Sense of security, personal environment– Emotional attachment– Stable households
Socio-economic inequalities
Building up equity Spatial concentration of opportunities Quality of housing and neighbourhoods Social mobility Separate markets
Separate markets
Few moves between the rented and owner-occupied segments
Interruption in building up equity Maintaining housing quality Rising incomes and housing consumption needs during
a large period of an individual’s life course Equity facilitating new purchase
Based on: Helderman, 2007
Moving from rent to own
Increase in housing budget Increase in housing consumption needs Higher quality home Higher quality neighbourhood Personal space, free to adjust to personal preferences Preference to own
Moving from own to rent
Decrease in housing budget Decrease in housing consumption needs Urgent need to relocate Desire to consume equity Preference for renting
Motives related to disruptions and changes in the family life cycle or life course patterns (divorce, separation, aging, health issues, change of jobs)
Levels of homeownership (%)
1991 1996 2001
Montréal 46.7 48.5 50.2
Vancouver 57.5 59.4 61.0
Toronto 57.9 58.4 63.2
Ontario 63.7 64.3 67.8
Canada 62.6 63.6 65.8
From census 1991, 1996 & 2001: Statistics Canada
“American dream”
Active policy Surge mid-1990s From 64% in 1994 to 69% in 2004 Homes important part of people’s net worth Affecting people’s spending, working, saving and
moving decisions Creative financing options/ more flexible mortgages
available Shift in demographics
Trend homeownership US
Socio-economic inequalities (2)
The income gap
Income of owners has increased 5% while income of renters has decreased about 4% between 1984-1999
The income gap increases 1% per year
The gap is widening
Income spent on housing
Owners 18%
Renters 28%
Average 21%
Socio-economic inequalities (3)
The wealth gap
The average wealth of homeowners went from 29 times that of renters to 70 times that of renters between 1984-1999
Note: on average 38% of homeowners’ wealth is tied up in the home
The gap is widening
Mechanisms of widening socio-economic gaps
Increase in house prices
Increase in rents
Government policy
Advantages of homeownership for governments
Stimulate individuals building up equity from their homes
Stimulate capital markets Increase supply of higher quality, owner-occupied
housing stock More adequate match of supply and demand Flexibility of labour markets? (Oswald, 1999;
Helderman, 2006)
Policy instruments
1) Tax incentives:
No tax on capital gains from house sales RRSP Home Buyers’ Plan (HBP) Flexible Down Payment Plan Lower Monthly Payments Purchase Plus Improvements Land Transfer Tax (LTT) Rebate
No housing related tax concessions for renters! Ontario waives land transfer taxes, may in theory be
beneficial to both owner-occ. and rent.
Policy instruments (2)
2) Subsidies
3) Rent control
4) Municipal regulations
Key: The ability to pay rents. The question remains… What would make rental investments sufficiently
profitable for developers?
Literature session 3
- Hulchanski, J.D. (2005), A tale of two Canadas: homeowners getting richer, renters getting poorer. In: J.D. Hulchanski & M. Shapcott (eds. 2005), Finding room. Policy options for a Canadian rental housing strategy. Chapter 4. p. 81-88.
- Oswald, A.J. (1999), The housing market and Europe’s unemployment: a non-technical paper, mimeo University of Warwick.
- Coulson, N.E. & Fisher, L.M. (2002), Tenure choice and labour market outcomes. Housing Studies, 17(1), pp. 35-49.
- Helderman, A.C. (2007), Once a homeowner, always a homeowner? An analysis of moves out of owner-occupation. Journal of Housing and the Built Environment (22), pp. 239-261.
Literature discussion
Hulchanski & Shapcott, chapter 4:
Housing tenure represents the divide between the two very different types of households in terms of income
and wealth
(Hulchanski, 2004, p. 85)
Literature discussion (2)
Oswald:
We can put Europe back to work by reducing homeownership
(Oswald, 1999, p.2)
Migration (long distance moves) is necessary for individual flexibility on the labour market so that advantage may be taken from economic opportunities(Helderman, 1st class)
Literature discussion (3)
Why do the papers of Oswald and Coulson & Fisher have totally separate outcomes?
Same hypothesis, different outcomes
Methodology: bivariate/ multivariate– Household situation/ life course stage– Dynamic/ static modelling
Assumptions: general/ partial models
Self-selection bias
Literature next session: Intergenerational transmission of homeownership
- Henretta, J.C. (1984), Parental status and child’s home ownership. American Sociological Review 49, pp. 131-140.
- Jenkins, S.P. & A.K. Maynard (1983), Intergenerational continuities in housing. Urban Studies 20, pp. pp. 431-438.
Classics!
Literature next session: Intergenerational transmission of homeownership
Helderman, A.C. & C.H. Mulder (2007), Intergenerational transmission of homeownership: the roles of gifts and continuities in housing market characteristics. Urban Studies 44 (2), pp. 231-247.
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