Duration of Residence in the Rental Housing Market

Posted: 9 Dec 2002

See all articles by Yongheng Deng

Yongheng Deng

Wisconsin School of Business, University of Wisconsin-Madison

Frank Nothaft

Freddie Mac

Stuart A. Gabriel

University of California, Los Angeles - Anderson School of Management

Multiple version iconThere are 2 versions of this paper

Abstract

This paper estimates a proportional hazard model of duration of residence in rental housing. The study employs unique data from the BLS-CPI housing sample to construct the duration of rental occupancy for metropolitan areas over the 1987-1998 period. American Housing Survey and other metropolitan economic data are used to proxy time-varying covariates of duration of residence. The paper employs an innovative semi-parametric estimation approach for group duration analysis of the proportional hazard model, as originally proposed by Ryu (1994) and then modified by Deng [(1995), (1997)].

Results of the analysis indicate that the duration of residence in rental housing varies signficantly across individual units and market segments. In fact, the duration of residence is highly time dependent, given significant intertemporal variation in many of the housing and market covariates. The paper provides evidence of high tenant turnover rates at about 3 years of residence. However, the turnover hazard curve depends as well on market conditions and housing policy. For example, imposition of rent control can shift the peak of the tenant turnover hazard curve to the left. Research findings further indicate that median housing costs, public housing share of the rental stock, poverty rate, and African-American and Hispanic share of tenant households are among those factors that positively affect tenant turnover hazard rates and hence are negatively related to tenant residence duration. Elevator buildings, unemployment rate, population growth and central city share of the rental stock negatively affect tenant turnover hazard rates and hence are positively related with tenant residence duration. Further, the estimated pattern of duration of residence was shown to vary substantially across 33 large metropolitan markets.

Simulation results further indicate the sensitivity of duration of residence to housing locational and structural characteristics. For example, findings for New York City indicate that increased geograhic dispersion of rental housing, as reflected in a reduction in the share of rental stock in the central city to national average levels, would serve to boost cumulative tenant turnover rates by 12 percent by the end of year three of the rental lease. Similarly, simulated reduction in the density of rental housing, as reflected in downward adjustment in the share of NYC buildings with seven or more stories to that of the national average level, would serve to increase cumulative tenant turnover rates by 13 percent. The research provides new evidence as regards tenant and market characteristics that determine the duration of residency. Clearly, an improved understanding thereof offers new insights as regards fluctuations in tenant turnover, building occupancy, and rent flows, as well as new confidence in pro forma assumptions critical to rental housing development.

Keywords: duration of residence, rental housing, hazard model

Suggested Citation

Deng, Yongheng and Nothaft, Frank and Gabriel, Stuart A., Duration of Residence in the Rental Housing Market. Journal of Real Estate Finance & Economics, Vol. 26, No. 2. Available at SSRN: https://ssrn.com/abstract=319903

Yongheng Deng (Contact Author)

Wisconsin School of Business, University of Wisconsin-Madison ( email )

4110 Grainger Hall
975 University Avenue
Madison, WI 53706
United States
+1 (608) 262-4865 (Phone)

HOME PAGE: http://https://bus.wisc.edu/faculty/yongheng-deng

Frank Nothaft

Freddie Mac ( email )

8200 Jones Branch Road
McLean, VA 22101
United States

Stuart A. Gabriel

University of California, Los Angeles - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
310-825-2922 (Phone)
310-206-5455 (Fax)

HOME PAGE: http://www.anderson.ucla.edu

Register to save articles to
your library

Register

Paper statistics

Abstract Views
751
PlumX Metrics