Urban Housing Demand,Permanent Income And Uncertainty

The sensitivity of housing demand to income changes and uncertainty has important implications for the housing affordability evolution and the behavior of urban households.Investigation into this issue shows increasing importance in the private rental housing market as it is regarded as suboptimal and contributing to gentrification and inequality problems.Using micro-data from four waves of Hong Kong Census data between 1996 and 2011,this paper aims to estimate income elasticity of demand for private rental housing.It adopts the permanent income model to isolate permanent income and transitory income of household.Then,it employs the Heckman two-stage procedure to correct selection bias and the quantile regression approach to investigate heterogeneity of demand elasticities across different tiers of housing expenditures.At last,we compared the heterogeneity of housing behavior among different types of families.The empirical results show that the permanent income elasticities fall within ranges of 0.513~0.820,respectively.Moreover,a novel U shape of permanent income elasticity across the whole distribution of housing expenditure is revealed—households in both upper and lower tiers are more sensitive to permanent income changes,the higher tier of households is more sensitive to income uncertainty;Married-headed households,male-headed households and immigrant families often have higher housing income elasticity.These findings not only shed light on the long-term movement and cross-sectional heterogeneity of housing demand in the private rental housing market,but also deliver implications for rental housing demand studies in other developed cities in China.