FREE ELECTRONIC LIBRARY - Theses, dissertations, documentation

Pages:     | 1 |   ...   | 16 | 17 || 19 | 20 |   ...   | 34 |

«reNtal HousiNg Policy iN tHe uNited states Volume 13, Number 2 • 2011 U.S. Department of Housing and Urban Development | Office of Policy ...»

-- [ Page 18 ] --

References Eggers, Fredrick, and Fouad Moumen. 2008. “Trends in Housing Costs: 1985–2005 and the 30-Percent-of-Income-Standard.” http://www.huduser.org/publications/pdf/Trends_hsg_ costs_85-2005.pdf (accessed November 25, 2010).

Glaeser, Edward L., and Joseph Gyourko. 2008. Rethinking Federal Housing Policy. Washington, DC:

The AEI Press.

Joint Center for Housing Studies (JCHS). 2008. “America’s Rental Housing: The Key to a Balanced National Policy.” JCHS website: http://www.jchs.harvard.edu/publications/rental/rh08_americas_ rental_housing/rh08_fact_sheet.pdf (accessed December 3, 2010).

Painter, Gary. 2010. What Happens to Household Formation in a Recession? Special report.

Washington, DC: Research Institute for Housing America of the Mortgage Bankers Association.

http://www.housingamerica.org/RIHA/RIHA/Publications/72429_9821_Research_RIHA_ Household_Report.pdf (accessed November 21, 2010).

Quigley, John M., and Steven Raphael. 2004. “Is Housing Unaffordable? Why Isn’t It More Affordable?” Journal of Economic Perspectives 18 (1): 129–152.

Saiz, Albert. 2003. “Room in the Kitchen for the Melting Pot: Immigration and Rental Prices,” Review of Economics and Statistics 85 (3): 502–521.

Schwartz, Mary B. 2009. American Community Survey 2007: A Comparison to Selected Housing and Financial Characteristics for the United States From the 2007 American Housing Survey, U.S. Census Bureau, Housing and Household Economic Statistics Division. Washington, DC: U.S. Government Printing Office.

Susin, Scott. 2001. The Impact of the Mariel Boatlift on the Miami Housing Market. Unpublished working paper. Washington, DC: U.S. Bureau of the Census.

–  –  –

Additional Reading

DiPasquale, Denise, and Michael Murray. 2008. Evolution of Metropolitan Rental Housing Markets:

A Final Report to the MacArthur Foundation. Unpublished paper.

Eggers, Fredrick, and Fouad Moumen. 2009. “American Housing Survey: Rental Market Dynamics:

2005–2007.” HUD USER website: http://www.huduser.org/datasets/cinch/cinch07/Rental_Mrkt_ 05-07.pdf. (accessed November 15, 2010).

Eggers, Fredrick, and Fouad Moumen. 2009. “American Housing Survey: Weighting Strategy for 2005–2007 CINCH Analysis.” HUD USER website: http://www.huduser.org/datasets/cinch/ cinch07/Strategy_05-07_CINCH.pdf (accessed November 15, 2010).

Green, Richard. 2010 (May). Thoughts on Rental Housing and Rental Housing Assistance.

Working paper.

Quigley, John M. 2008. “Just Suppose: Housing Subsidies for Low-Income Renters.” In Revisiting Rental Housing, edited by Nicolas P. Retsinas and Eric S. Belsky. Washington, DC: The Brookings Institution: 300–319.

Ruggles, Steven J., Trent Alexander, Katie Genadek, Ronald Goeken, Matthew B. Schroeder, and Matthew Sobek. 2010. Integrated Public Use Microdata Series: Version 5.0 [Machine-readable database]. Minneapolis: University of Minnesota.

Shroder, Mark, and Marge Martin. 1996. New Results From Administrative Data: Housing the Poor, or, What They Don’t Know Might Hurt Somebody. Washington, DC: U.S. Department of Housing and Urban Development, Office of Policy Development and Research.

Vandenbroucke, David A. 2011. Housing Affordability Data System. HUD USER website: http:// www.huduser.org/portal/datasets/hads/HADS_doc.pdf (accessed October 27, 2011).

–  –  –

Abstract The decision of whether to rent or own a home should involve an evaluation of the relative risks and the relative costs of the two options. It is often assumed that renting is less risky than homeownership, but that is not always the case. Which option is riskier depends on the risk source and household characteristics.

This article provides a framework for understanding the sources of risk for renters. It outlines the most important determinants of risk: volatility in the total cost of obtaining housing, changes in housing costs after a move, and the correlation of rents with incomes.

The article characterizes the magnitudes of those risks and discusses how the effects of risk vary across renter types and U.S. metropolitan areas. In addition, the article shows that renters spend less of their cash flow on housing than do otherwise equivalent owners and, thus, are better able to absorb housing cost risk.

Finally, potential policy approaches to rental housing that avoid increasing rent risk are discussed. A simple way to maintain renters’ capacity to absorb rent risk is to avoid subsidies that result in an incentive to consume a larger rental housing quantity. Targeting rental subsidies to more mobile households or those living in low-volatility cities, where renting is less risky, should be considered. Long-term leases would provide an intermediate position between renting annually and owning but are currently rare.

Introduction Much of the discussion about government subsidies that are targeted at homeownership or renting focuses on the subsidies’ effects on the relative cost of owning versus renting. For example, how much do tax subsidies to homeownership lower the cost of owning? Is housing affordable, and do rental subsidies lower housing costs for low-income families? Are rents higher because renting is less economically efficient than owning because of misaligned incentives for renters and landlords?

Cityscape 105 Cityscape: A Journal of Policy Development and Research • Volume 13, Number 2 • 2011 U.S. Department of Housing and Urban Development • Office of Policy Development and Research Sinai Cost is just one of many differences between renting and owning, however. Another important distinction between the two tenure modes is risk. Both renters and homeowners face financial uncertainty in regard to their housing spending. How that uncertainty is manifested depends on a household’s choice of tenure mode. Renters do not have large housing capital amounts at stake and thus are not affected by house price swings in their current market. Renters face uncertainty, however, about how much rent will cost during their lifetimes and are also subject to highfrequency rent volatility. In addition, renters do not automatically have an investment position in the housing market; therefore, they are more susceptible to volatility in the future housing cost, both locally and in other cities.

Any discussion of whether owning or renting is better for households should account for risk, not just cost. For example, when housing policy is evaluated, consideration should be given not only to how policy distorts households away from the optimal dollar amount of housing consumption, but also to how policy encourages or discourages taking financial risks that are best suited for a household.

Because the risks of renting and owning are not universally bad, but are merely inappropriate for some households and more appropriate for others, policymakers should consider risk in several ways when formulating policy toward renting. First, recognize that such policy might have unintended consequences for household risk. Renting exposes a household to housing market volatility, with the magnitude depending on the geographical market. Second, avoid incentivizing renters to spend larger portions of their incomes on rent because higher housing spending raises risk for renters as well as owners. Third, tailor policy to encourage renting (or not encourage homeownership) for just those households that would experience relatively less renting risk. For example, some housing markets are inherently less volatile and renters there face little uncertainty. Fourth, consider that financial products that could enable long-term renters to mitigate risk, such as long-term leases, exist but are not popular. The reason such products are unpopular is unknown, but a possibility is that subsidies to homeownership simply make owning a cheaper way to obtain many of the same benefits.

This article is motivated in part by the recognition that rental subsidies need not be targeted solely to low-income households. Homeownership subsidies are available throughout the income spectrum (Poterba and Sinai, 2010) and one could imagine policymakers considering a parallel program for renting. When policy goals move beyond considerations such as using rental subsidies to target income transfers to needy households, or to ensure a minimum rental housing quality standard, policymakers need to be aware of potential consequences of a broad based shift to renting.

Ironically, despite the common perception that homeownership is risky, encouraging renting would induce many households to actually take on more risk. The next section describes some sources of financial uncertainty for renters and homeowners. The section on getting from volatility to risk details how housing uncertainty morphs into risk and explains how the riskiness of renting can vary between geographic space and household types. Next, the article reviews evidence that renters are keen enough to avoid that risk that they are often willing to pay a premium above the rental cost to become homeowners. The section on capacity for volatility explains how some households can absorb risk with fewer consequences. Rent risk implications for policies aimed toward rental housing are considered in the final section.

106 Rental Housing Policy in the United States Understanding and Mitigating Rental Risk The Volatility of Renting and Owning To begin, it is important to recognize that the choice of how much housing to consume can be divorced from the question of how to pay for it. Many peoples’ perceptions of the differences between renting and owning are colored by the fact that the residences that people tend to rent typically are quite different from the residences that people tend to buy. Rental residences are more likely to be in multifamily units, smaller, and less expensive within a given market. Thus the difference between renting and owning is often perceived as a decision about the quantity, the location, or the price point to consume. Despite the fact that owned and rented housing stocks are currently somewhat distinct, however, any given housing unit could be either purchased or rented—at some purchase price or rent amount. Indeed, if the United States were to shift away from its long history of subsidizing homeownership to something more akin to a level playing field or even a net subsidy to renting, the household types that currently tend to own could easily choose to rent instead, and housing units that currently tend to be owned could conceivably enter the rental stock. Of course, the implied annual cost of renting or owning the same unit can differ for a host of reasons, including differential tax treatment as an owner versus a landlord or renter, and the lower efficiency with which a landlord can monitor his or her rental property relative to an owner-occupier, especially if the dwelling is a single-family detached house.

Holding the housing unit and its annual cost the same across owning and renting, the financial difference between the two tenure modes comes down to the manner in which the service flow from that housing unit is paid for. Renters pay the flow cost of housing services as rent. By contrast, owners pay an upfront price to purchase a house. In addition, homeowners are responsible for property taxes and maintenance costs, whereas for a residential lease, the maintenance costs are typically included in the rent. Unlike renters, however, owners may receive money back when they sell their houses, taking either a capital gain or loss.

Another way to think about the difference in payments between renters and owners is that renters simply pay the spot price of housing services (the rent) whereas owners purchase an asset (the house) that pays a dividend exactly equal to the rent. In effect, owners use the yield from their housing asset to pay rent, with the two exactly netting out. By contrast, renters pay rent each year out of their pockets. Because renters do not have to make an initial investment in a house, however, they can instead use those funds to invest in other assets.

Both renters and owners start life with the same implicit future liability––they have to pay the market cost of obtaining housing every year for the rest of their lives. Beyond that, they make different portfolio decisions. Owners invest in houses whereas renters invest in some other set of assets. The usual equilibrium assumption, found in Hendershott and Slemrod (1983) and Poterba (1984), is that both portfolio positions should deliver the same risk adjusted return in expectation.

Therefore, renters and owners in this example are equivalently wealthy and have comparable expected incomes. In other words, the only way a marginal household could expect to retain more income net of housing costs by being a renter rather than an owner is either by consuming a lower level of housing quantity or quality as a renter or by taking more risk. If owning and renting costs were not equal, after adjusting for differences in risk, households would change tenure mode until the relative costs of owning and renting became equal. For example, if everyone perceived

Cityscape 107Sinai

renting to be cheaper than owning, then homeowners would sell their houses and become renters until rents rose and house prices fell enough to make the difference in cost disappear. Of course, this equivalence in rental and ownership costs holds only for some marginal homebuyers, leaving perhaps many households strictly favoring one tenure mode or the other. Ownership and rental clienteles can be driven by differences in tax treatment, fixed home buying costs combined with the expected length of stay in the residence, underlying desire for homeownership, or other possibilities.

Differences in how renters and owners pay for their housing each lead to different sources of volatility. Renters, for example, do not know in advance how much their housing is going to cost them. It is up to the market. If rents in their cities rise faster than they expected, their total costs will be higher than anticipated. If rent growth unexpectedly stalls out, their total costs will be lower. In either case, the total lifetime cost of obtaining a home is uncertain.

Pages:     | 1 |   ...   | 16 | 17 || 19 | 20 |   ...   | 34 |

Similar works:

«Five Design Principles for Journal of Crowdsourced Policymaking: Social Assessing the Case of Crowdsourced Media for Off-Road Traffic Law in Finland Tanja Aitamurto, Organizations Hélène Landemore Volume 2, Number 1 Published by the MITRE Corporation Journal of Social Media for Organizations _ Five design principles for crowdsourced policymaking: Assessing the case of crowdsourced off-road traffic law in Finland Tanja Aitamurto, tanjaa@stanford.edu Hélène Landemore,...»

«ASIA-PACIFIC POLICY ADMINISTRATION SYSTEMS PROPERTY & CASUALTY ABCD VENDOR VIEW Wenli Yuan January, 2014 This authorised reprint contains material excerpted from a recent Celent report profiling and evaluating 26 different policy administration systems. The full report is over 110 pages long. This report was not sponsored by Sapiens in any way. This reprint was prepared specifically for Sapiens, but the analysis presented has not been changes from that presented in the full report. For more...»

«PART II KEY POLICY ISSUES IN ENTREPRENEURSHIP AND SME DEVELOPMENT Part II of this report is structured in six thematic chapters. Each chapter starts with a summary of main findings from the local case study areas by the OECD. In the following paper, both theoretical and practical aspects of policy action are discussed in light of new policy approaches and options. References are made to good practice initiatives in East Germany and other regions in OECD member countries. A chapter concludes...»

«The administrative working procedures of smaller states in the decision-making process of the EU by Dr. Baldur Thorhallsson University of Iceland e-mail: baldurt@hi.is Abstract This paper argues that the size and characteristics of administrations is a significant variable in explaining the behaviour of smaller states in the decision-making process of the European Union (EU) in the areas of the Common Agricultural Policy (CAP) and the Regional Policy. It argues that administrative working...»

«Information Technology Policy INFORMATION AND TECHNOLOGY POLICY MANUAL Information Technology Policy Information and Technology Policy (Created by the Board of Directors as a separate policy manual on April 19, 2012. Last amended January 2016). Table of Contents IT GOVERNANCE IT Oversight Body Risk Management Risk Registry Policy Management Acceptable Use Policy IT Management IT Security Training ORGANIZATION AND MANAGEMENT Change Management Controls Physical and Environmental Controls Software...»


«CHAPTER 2 addition to an annual salary. THE SUPERVISOR AS POLICYMAKER The strength of the office of township supervisor as a policymaking position rests largely on the image the public accords the office and the political strength of the officeholder. How the public views the office undoubtedly varies from township to township, but it seems fair to say that most township citizens consider the supervisor the chief elected township officer. To the extent that this is so, the township supervisor...»

«FOR IMMEDIATE RELEASE: The Italian Cultural Institute of New York, in collaboration with the Department of Italian Studies and the Watson Institute for International Studies at Brown University, presents: 150 Years of Italian Government: What has been achieved?” A Seminar New York,-The most prominent Italian think tanks and a select group of American academics, together with former Italian Prime minister Romano Prodi (Professor at large at Brown University), have been invited by the Italian...»

«A/HRC/11/5 Advance version Distr.: General 26 March 2009 English Original: French HUMAN RIGHTS COUNCIL Eleventh session Item 10 of the agenda TECHNICAL ASSISTANCE AND CAPACITY-BUILDING REPORT OF THE INDEPENDENT EXPERT ON THE SITUATION OF HUMAN RIGHTS IN HAITI, MICHEL FORST* Summary In the area of civil and political rights, notable progress has been made with the passing of the framework laws on the reform of the judicial profession, the Supreme Council of the Judiciary and the independence of...»

«Youth Policy: What Works and What Doesn’t? A Review of Youth Policy Models From Canada and Other Jurisdictions February 2008 Youth Policy: What Works and What Doesn’t A report of United Way Toronto February 2008 Prepared by: Kamara Jeffrey United Way Project Staff: Diane Dyson Kathy Gallagher-Ross Michelle Smith Ming-Young Tam Peter Alexander United Way Toronto thanks and acknowledges the following individuals for their contribution of time and expertise: Angela Carr, Government of New...»

«El legado teórico de la Escuela de Frankfurt Titulo Sazbón, José Autor/a Autor(es) Teoría y filosofía política. La recuperación de los clásicos en el debate En: latinoamericano Buenos Aires Lugar CLACSO, Consejo Latinoamericano de Ciencias Sociales Editorial/Editor 2002 Fecha Colección Intelectuales; Politica; Filosofia; Teoria Politica; Filosofia Politica; Temas Capítulo de Libro Tipo de documento http://bibliotecavirtual.clacso.org.ar/clacso/se/20100613010904/10sazbon.pdf URL...»

«st 1100 Bank Street, 1 Floor Richmond, VA 23219-3642 Rev 2/10/15 November 3, 2015 General and Special Elections Candidacy Requirements for Local Offices VOICE: 804-864-8901 TTY TOLL-FREE 800-260-3466 VOICE TOLL-FREE: 800-552-9745 FAX: 804-371-0194  General Disclaimer The information contained in this candidacy requirements bulletin is provided with the aim of providing an overview of Virginia electoral requirements. This document, and its contents, however,...»

<<  HOME   |    CONTACTS
2016 www.theses.xlibx.info - Theses, dissertations, documentation

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.