Household formation, housing prices, and public policy impacts

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Abstract

This paper specifies and estimates a model of housing demand that explicitly includes the decision of individuals to form independent households. Parameter estimates reveal a considerable response of headship rates not only to income but also to housing prices. Analysis of housing policies ignoring the endogeneity of household formation is thus potentially biased. The model is employed to evaluate the effects of a housing voucher program. Simulated responses indicate that such a program creates a substantial additional demand for housing due to its positive impact on the propensity of young and elderly persons to live independently.

Original languageEnglish
Pages (from-to)145-164
Number of pages20
JournalJournal of Public Economics
Volume30
Issue number2
DOIs
StatePublished - Jul 1986
Externally publishedYes

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