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User Cost and the Demand for Housing Attributes
Author(s) -
Gill H. Leroy,
Haurin Donald R.
Publication year - 1991
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00558
Subject(s) - bundle , economics , microeconomics , contrast (vision) , component (thermodynamics) , econometrics , supply and demand , computer science , artificial intelligence , materials science , physics , composite material , thermodynamics
A number of studies have related changes in the demand for housing to changes in user cost. All have treated housing as a composite good rather than as a bundle of characteristics. We consider the effect of changing user cost on the demand for the component characteristics of owner‐occupied housing, and, given information about the supply of the characteristics, we predict implicit price responses. An empirical test of our model indicates that reductions in user cost result in higher real prices for the non‐replicable attributes of housing, examples being location and access to fixed amenities. In contrast, the price of attributes that are perfectly elastic in supply are not affected by changes in user costs. We conclude that the effects of changing user cost are not uniform across housing types and locations, thus generating the appearance of housing submarkets.