GGR 357 H1F Geography of Housing and Housing Policy

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GGR 357 H1F Geography of Housing and Housing
Policy  
May 14, 2008SESSION 2 TENURE CHOICE AND
SOCIO-ECONOMIC INEQUALITIES
DR. AMANDA HELDERMAN
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Course web page

• http//individual.utoronto.ca/helderman/

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Announcements

• Text book sale
• 15.00
• Exact change only
• Room 50.57
• Additional opportunities?

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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

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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/demograph
  ics/
• 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_at_geog.utoronto.ca

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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)

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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

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Highlights from first session

• Several slides are worth revisiting
• Summary first session
• Definition of housing, complexity concept
• Importance of housing
• Modelling housing market behaviour

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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

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The services delivered by housing

• Access to/ occupancy of housing delivers
• Shelter from the elements
• Value/ wealth ? equity for owners
• Shelter from taxes ? e.g. capital
• Accessibility to services (e.g. schools)
• Accessibility to work
• Accessibility to neighbourhood
• Social status
• Right to privacy/ exclusion

Services
Role of location!
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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

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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

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Life course, parallel careers
Child birth
Cohabitation
Remarriage
Divorce/ separation
Child birth
Widowhood
HH
Job change
Job change
LB
Enrolling into higher education
ED
HS
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Life course paradigm shift in the social sciences
New!

• 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 peoples lives
• UNIVERSAL these events apply for almost
  everyone, and occur everywhere and throughout
  history

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Introduction housing tenure (new topic)

• Housing tenure choice
• Individual advantages/ disadvantages to
  homeownership
• Socio-economic inequalities
• Separate markets
• Mechanisms of widening socio-economic gaps

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Introduction

• Advantages of homeownership for governments
• Policy instruments
• Literature discussion

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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

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The values of housing

• Consumption value
• Investment value
• Policy importance

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Means-end model
Basic needs
Values
Goals and objectives
Intentions
Household characteristics
Current situation
Choice behaviour
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Values and consequences

• Value
• Consequence
• Attribute

• Privacy
• More space
• Five rooms

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Housing tenure and the life course

• Some rent while being young
• while others need rental housing throughout
  their lives.

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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

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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

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Socio-economic inequalities

• Building up equity
• Spatial concentration of opportunities
• Quality of housing and neighbourhoods
• Social mobility
• Separate markets

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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 individuals life
  course
• Equity facilitating new purchase
• Based on Helderman, 2007

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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

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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)

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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
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American dream

• Active policy
• Surge mid-1990s
• From 64 in 1994 to 69 in 2004
• Homes important part of peoples net worth
• Affecting peoples spending, working, saving and
  moving decisions
• Creative financing options/ more flexible
  mortgages available
• Shift in demographics

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Trend homeownership US
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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

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Income spent on housing
Owners 18
Renters 28
Average 21
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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

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Mechanisms of widening socio-economic gaps

• Increase in house prices
• Increase in rents
• Government policy

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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)

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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.

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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?

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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
  Europes 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.

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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)

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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)
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Literature discussion (3)

• Why do the papers of Oswald and Coulson Fisher
  have totally separate outcomes?

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Same hypothesis, different outcomes

• Methodology bivariate/ multivariate
• Household situation/ life course stage
• Dynamic/ static modelling
• Assumptions general/ partial models
• Self-selection bias

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Literature next session Intergenerational
transmission of homeownership

• - Henretta, J.C. (1984), Parental status and
  childs 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!
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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.