Towards housing policies that consider household’s preferences: estimating the demand for housing attributes in Chile
Abstract
Understanding household preferences for housing attributes is imperative for developing countries after years of housing policies that failed mostly due to the mismatch between housing solutions and needs. This paper provides income and price elasticity estimates of the demand for housing attributes as an indicator to measure how households perceive housing attributes (necessities or luxuries). These metrics are important because they allow evaluating previously national-level housing policies as well as suggesting new paths of action that are in accordance to households’ preferences. The study focuses on Chile because its influential role in designing housing policies in other developing countries (Gilbert, 2002). Using five cross-section household surveys from 2000–2011, our results suggest that Size and Location are perceived as basic necessities. Contrarily, Quality and Housing Features are considered luxury goods. Size and Location are more price-inelastic than other attributes. These results are consistent across regions, and suggest that households prefer larger and better-located houses.
Keywords:
almost ideal demand system, housing attributes, Chile, housing demand, housing policyHow to Cite
Lopez, E., & Paredes, D. (2018). Towards housing policies that consider household’s preferences: estimating the demand for housing attributes in Chile. International Journal of Strategic Property Management, 22(1), 24-36. https://doi.org/10.3846/ijspm.2018.320
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Copyright (c) 2018 The Author(s). Published by Vilnius Gediminas Technical University.
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Caldera Sánchez, A. (2012). Building blocks for a better functioning housing market in Chile. OECD Economics Department Working Papers, No. 943. OECD Publishing.
Chacon, S., & Paredes, D. (2014). Spatial income inequality in Chile and the rol of spatial labor sorting. Ideas.Repec.org. Retrieved from <a href= "http://ideas.repec.org/p/cat/dtecon/dt201315.html" target="_blank" rel="noopener"> http://ideas.repec.org/p/cat/dtecon/dt201315.html</a>
Chamorro, C. (2013). Politica habitacional en Chile: historia, resultados y desafíos. Documento de trabajo de La Cámara Chilena de la Construcción. Retrieved from <a href= "http://www.cchc.cl/wp-content/uploads/2013/05/DT72-Pol%C3%ADtica-Habitacional.pdf" target="_blank" rel="noopener"> http://www.cchc.cl/wp-content/uploads/2013/05/DT72-Pol%C3%ADtica-Habitacional.pdf</a>
Cheshire, P., & Sheppard, S. (1998). Estimating the demand for housing, land, and neighbourhood characteristics. Oxford Bulletin of Economics and Statistics, 60(3), 357-382. <a href= "https://doi.org/10.1111/1468–0084.00104" target="_blank" rel="noopener"> https://doi.org/10.1111/1468–0084.00104</a>
Combes, P. P., Duranton, G., & Gobillon, L. (2011). The identification of agglomeration economies. Journal of Economic Geography, 11(2), 253-266. <a href= "https://doi.org/10.1093/jeg/lbq038" target="_blank" rel="noopener"> https://doi.org/10.1093/jeg/lbq038</a>
Cropper, M. L., Deck, L. B., & McConnell, K. E. (1988). On the choice of funtional form for hedonic price functions. Review of Economics and Statistics, 70(4), 668-675. <a href= "https://doi.org/10.2307/1935831" target="_blank" rel="noopener"> https://doi.org/10.2307/1935831</a>
Deaton, A., & Muellbauer, J. (1980). An almost ideal demand system. American Economic Review, 70(3), 312-326.
Follain, J. R., & Jimenez, E. (1985). The demand for housing characteristics in developing countries. Urban Studies, 22(5), 421-432. <a href= "https://doi.org/10.1080/00420988520080731" target="_blank" rel="noopener"> https://doi.org/10.1080/00420988520080731</a>
Garcia, J., & Raya, J. M. (2011). Price and income elasticities of demand for housing characteristics in the city of Barcelona. Regional Studies, 45(5), 597-608. <a href= "https://doi.org/10.1080/00343401003713381" target="_blank" rel="noopener"> https://doi.org/10.1080/00343401003713381</a>
Gilbert, A. (2002). Power, ideology and the Washington consensus: the development and spread of Chilean housing policy. Housing Studies, 17(2): 305-324. <a href= "https://doi.org/10.1080/02673030220123243" target="_blank" rel="noopener"> https://doi.org/10.1080/02673030220123243</a>
Gilbert, A. (2011). La vivienda en América Latina: revisando estrategias [Housing in Latin America: Reviced strategies]. Revista de Ingeniería, 35, 48-50.
Gilbert, A. G. (2014). Free housing for the poor: an effective way to address poverty?. Habitat International, 41, 253-261. <a href= "https://doi.org/10.1016/j.habitatint.2013.08.009" target="_blank" rel="noopener"> https://doi.org/10.1016/j.habitatint.2013.08.009</a>
Greene, M., & Ortúzar, J. de D. (2002). Willingness to pay for social housing attributes: a case study from Chile. International Planning Studies, 7(1), 55-87. <a href= "https://doi.org/10.1080/13563470220112607" target="_blank" rel="noopener"> https://doi.org/10.1080/13563470220112607</a>
Halvorsen, R., & Pollakowski, H. O. (1981). Choice of functional form for hedonic price equations. Journal of Urban Economics, 10(1), 37-49. <a href= "https://doi.org/10.1016/0094–1190(81)90021–8" target="_blank" rel="noopener"> https://doi.org/10.1016/0094–1190(81)90021–8</a>
King, A. T. (1976). The demand for housing: a Lancastrian approach. Southern Economic Journal, 43(2), 1077-1087. <a href= "https://doi.org/10.2307/1057332" target="_blank" rel="noopener"> https://doi.org/10.2307/1057332</a>
Lim, G. C., Follain, J. Jr., & Renaud, B. (1984). Economics of residential crowding in developing countries. Journal of Urban Economics, 16(2), 173-186.
Lopez, E., & Aroca, P. (2012). Estimación de la inflación regional de los precios de la viviendaen Chile, El Trimestre Economico LXXIX(3), No. 315, 601-630.
McMillan, M. L. (1979). Estimates of households’ preferences for environmental quality and other housing characteristics from a system of demand equations. Scandinavian Journal of Economics, 81(2), 174-187. <a href= "https://doi.org/10.2307/3439958" target="_blank" rel="noopener"> https://doi.org/10.2307/3439958</a>
MINVU. (2004). Capítulo 3. La Vivienda Social en el periódo de ensayos legislativo, en Chile: Un siglo de políticas en vivienda y barrio.
Paredes, D. (2011). A methodology to compute regional housing price index using matching estimator methods. Annals of Regional Science, 46(1), 139-157. <a href= "https://doi.org/10.1007/s00168–009–0346-z" target="_blank" rel="noopener"> https://doi.org/10.1007/s00168–009–0346-z</a>
Paredes, D., & Iturra Rivera, V. (2013). Substitution bias and the construction of a spatial cost of living index. Papers in Regional Science, 92(1), 103-117.
Parsons, G. R. (1986). An almost ideal demand system for housing attributes. Southern Economic Journal, 53(2), 347-363. <a href= "https://doi.org/10.2307/1059418" target="_blank" rel="noopener"> https://doi.org/10.2307/1059418</a>
Pasha, H. A., & Butt, M. S. (1996). Demand for housing attributes in developing countries: a study of Pakistan. Urban Studies, 33(7), 1141-1154. <a href= "https://doi.org/10.1080/00420989650011555" target="_blank" rel="noopener"> https://doi.org/10.1080/00420989650011555</a>
Ray, R. (1983). Measuring the costs of children: an alternative approach. Journal of Public Economics, 22(1), 89-102. <a href= "https://doi.org/10.1016/0047–2727(83)90058–0" target="_blank" rel="noopener"> https://doi.org/10.1016/0047–2727(83)90058–0</a>
Richards, B. (1995). Poverty and housing in Chile: the development of a neo-liberal welfare state. Habitat International, 19(4), 515-527. <a href= "https://doi.org/10.1016/0197–3975(95)00043-F" target="_blank" rel="noopener"> https://doi.org/10.1016/0197–3975(95)00043-F</a>
Rosen, S. (1974). Hedonic prices and implicit markets: product differentiation in pure competition. Journal of Political Economy, 82(1), 34-55. <a href= "https://doi.org/10.1086/260169" target="_blank" rel="noopener"> https://doi.org/10.1086/260169</a>
Rubio, R. (2006). Lecciones de la política de vivienda en Chile. Bitácora Urbano-Territorial, 10, 197-206.
Soto, R., & Torche, A. (2004). Spatial inequality, migration, and economic growth in Chile. Cuadernos de Economía, 41, 401-424.
Wooldridge, J. (2012). Introductory econometrics: a modern approach (5th ed.). Mason: South-Western.
Arimah, B. (1992). Hedonic prices and the demand for housing attributes in a third world city: the case of Ibadan, Nigeria. Urban Studies, 29(5), 639-651. <a href= "https://doi.org/10.1080/00420989220080601" target="_blank" rel="noopener"> https://doi.org/10.1080/00420989220080601</a>
Caldera Sánchez, A. (2012). Building blocks for a better functioning housing market in Chile. OECD Economics Department Working Papers, No. 943. OECD Publishing.
Chacon, S., & Paredes, D. (2014). Spatial income inequality in Chile and the rol of spatial labor sorting. Ideas.Repec.org. Retrieved from <a href= "http://ideas.repec.org/p/cat/dtecon/dt201315.html" target="_blank" rel="noopener"> http://ideas.repec.org/p/cat/dtecon/dt201315.html</a>
Chamorro, C. (2013). Politica habitacional en Chile: historia, resultados y desafíos. Documento de trabajo de La Cámara Chilena de la Construcción. Retrieved from <a href= "http://www.cchc.cl/wp-content/uploads/2013/05/DT72-Pol%C3%ADtica-Habitacional.pdf" target="_blank" rel="noopener"> http://www.cchc.cl/wp-content/uploads/2013/05/DT72-Pol%C3%ADtica-Habitacional.pdf</a>
Cheshire, P., & Sheppard, S. (1998). Estimating the demand for housing, land, and neighbourhood characteristics. Oxford Bulletin of Economics and Statistics, 60(3), 357-382. <a href= "https://doi.org/10.1111/1468–0084.00104" target="_blank" rel="noopener"> https://doi.org/10.1111/1468–0084.00104</a>
Combes, P. P., Duranton, G., & Gobillon, L. (2011). The identification of agglomeration economies. Journal of Economic Geography, 11(2), 253-266. <a href= "https://doi.org/10.1093/jeg/lbq038" target="_blank" rel="noopener"> https://doi.org/10.1093/jeg/lbq038</a>
Cropper, M. L., Deck, L. B., & McConnell, K. E. (1988). On the choice of funtional form for hedonic price functions. Review of Economics and Statistics, 70(4), 668-675. <a href= "https://doi.org/10.2307/1935831" target="_blank" rel="noopener"> https://doi.org/10.2307/1935831</a>
Deaton, A., & Muellbauer, J. (1980). An almost ideal demand system. American Economic Review, 70(3), 312-326.
Follain, J. R., & Jimenez, E. (1985). The demand for housing characteristics in developing countries. Urban Studies, 22(5), 421-432. <a href= "https://doi.org/10.1080/00420988520080731" target="_blank" rel="noopener"> https://doi.org/10.1080/00420988520080731</a>
Garcia, J., & Raya, J. M. (2011). Price and income elasticities of demand for housing characteristics in the city of Barcelona. Regional Studies, 45(5), 597-608. <a href= "https://doi.org/10.1080/00343401003713381" target="_blank" rel="noopener"> https://doi.org/10.1080/00343401003713381</a>
Gilbert, A. (2002). Power, ideology and the Washington consensus: the development and spread of Chilean housing policy. Housing Studies, 17(2): 305-324. <a href= "https://doi.org/10.1080/02673030220123243" target="_blank" rel="noopener"> https://doi.org/10.1080/02673030220123243</a>
Gilbert, A. (2011). La vivienda en América Latina: revisando estrategias [Housing in Latin America: Reviced strategies]. Revista de Ingeniería, 35, 48-50.
Gilbert, A. G. (2014). Free housing for the poor: an effective way to address poverty?. Habitat International, 41, 253-261. <a href= "https://doi.org/10.1016/j.habitatint.2013.08.009" target="_blank" rel="noopener"> https://doi.org/10.1016/j.habitatint.2013.08.009</a>
Greene, M., & Ortúzar, J. de D. (2002). Willingness to pay for social housing attributes: a case study from Chile. International Planning Studies, 7(1), 55-87. <a href= "https://doi.org/10.1080/13563470220112607" target="_blank" rel="noopener"> https://doi.org/10.1080/13563470220112607</a>
Halvorsen, R., & Pollakowski, H. O. (1981). Choice of functional form for hedonic price equations. Journal of Urban Economics, 10(1), 37-49. <a href= "https://doi.org/10.1016/0094–1190(81)90021–8" target="_blank" rel="noopener"> https://doi.org/10.1016/0094–1190(81)90021–8</a>
King, A. T. (1976). The demand for housing: a Lancastrian approach. Southern Economic Journal, 43(2), 1077-1087. <a href= "https://doi.org/10.2307/1057332" target="_blank" rel="noopener"> https://doi.org/10.2307/1057332</a>
Lim, G. C., Follain, J. Jr., & Renaud, B. (1984). Economics of residential crowding in developing countries. Journal of Urban Economics, 16(2), 173-186.
Lopez, E., & Aroca, P. (2012). Estimación de la inflación regional de los precios de la viviendaen Chile, El Trimestre Economico LXXIX(3), No. 315, 601-630.
McMillan, M. L. (1979). Estimates of households’ preferences for environmental quality and other housing characteristics from a system of demand equations. Scandinavian Journal of Economics, 81(2), 174-187. <a href= "https://doi.org/10.2307/3439958" target="_blank" rel="noopener"> https://doi.org/10.2307/3439958</a>
MINVU. (2004). Capítulo 3. La Vivienda Social en el periódo de ensayos legislativo, en Chile: Un siglo de políticas en vivienda y barrio.
Paredes, D. (2011). A methodology to compute regional housing price index using matching estimator methods. Annals of Regional Science, 46(1), 139-157. <a href= "https://doi.org/10.1007/s00168–009–0346-z" target="_blank" rel="noopener"> https://doi.org/10.1007/s00168–009–0346-z</a>
Paredes, D., & Iturra Rivera, V. (2013). Substitution bias and the construction of a spatial cost of living index. Papers in Regional Science, 92(1), 103-117.
Parsons, G. R. (1986). An almost ideal demand system for housing attributes. Southern Economic Journal, 53(2), 347-363. <a href= "https://doi.org/10.2307/1059418" target="_blank" rel="noopener"> https://doi.org/10.2307/1059418</a>
Pasha, H. A., & Butt, M. S. (1996). Demand for housing attributes in developing countries: a study of Pakistan. Urban Studies, 33(7), 1141-1154. <a href= "https://doi.org/10.1080/00420989650011555" target="_blank" rel="noopener"> https://doi.org/10.1080/00420989650011555</a>
Ray, R. (1983). Measuring the costs of children: an alternative approach. Journal of Public Economics, 22(1), 89-102. <a href= "https://doi.org/10.1016/0047–2727(83)90058–0" target="_blank" rel="noopener"> https://doi.org/10.1016/0047–2727(83)90058–0</a>
Richards, B. (1995). Poverty and housing in Chile: the development of a neo-liberal welfare state. Habitat International, 19(4), 515-527. <a href= "https://doi.org/10.1016/0197–3975(95)00043-F" target="_blank" rel="noopener"> https://doi.org/10.1016/0197–3975(95)00043-F</a>
Rosen, S. (1974). Hedonic prices and implicit markets: product differentiation in pure competition. Journal of Political Economy, 82(1), 34-55. <a href= "https://doi.org/10.1086/260169" target="_blank" rel="noopener"> https://doi.org/10.1086/260169</a>
Rubio, R. (2006). Lecciones de la política de vivienda en Chile. Bitácora Urbano-Territorial, 10, 197-206.
Soto, R., & Torche, A. (2004). Spatial inequality, migration, and economic growth in Chile. Cuadernos de Economía, 41, 401-424.
Wooldridge, J. (2012). Introductory econometrics: a modern approach (5th ed.). Mason: South-Western.
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Copyright (c) 2018 The Author(s). Published by Vilnius Gediminas Technical University.
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This work is licensed under a Creative Commons Attribution 4.0 International License.
How to Cite
Lopez, E., & Paredes, D. (2018). Towards housing policies that consider household’s preferences: estimating the demand for housing attributes in Chile. International Journal of Strategic Property Management, 22(1), 24-36. https://doi.org/10.3846/ijspm.2018.320