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: Helderman@geog.utoronto.ca

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.