Leo Grebler

Resource Allocation to Housing Investment: A Comparative International Study

The position of the housing sector in various stages of economic development has long been a controversial issue in both the literature and the conduct of public policy. This is especially true for the role of housing investment in developing nations. The subject has been discussed at three levels. First, housing specialists and urban planners have engaged in a debate with economists about the optimal allocation of scarce resources to residential construction. Second, an attempt has been made to formulate and test a normative theory of housing investment on the assumption of indirect benefits of improved housing. Third, some writers have postulated stages of housing development geared to stages of economic growth. As will be seen, none of these approaches has produced even moderately conclusive results. Meanwhile, government action to influence the volume and composition of residential building has become nearly universal throughout the Free World, not to speak of the more complete planning of output allocations in socialist countries. This is in sharp contrast to the earlier growth phases of the now advanced nations when the unbridled market mechanism was the sole arbiter of relative resource use for housing. Strangely, research to date has bypassed any comprehensive and systematic examination of the actual shares of residential construction in the total output of countries at various levels of development. Nor has any effort been made to identify and measure the principal determinants of intercountry variance in resource allocation to housing. An exploration of these two subjects is the main purpose of this article. The analysis is prefaced by a brief review of the previous approaches to defining the role of housing in economic development.

Long‐term prospects for US housing markets: Fewer units, greater investment

Abstract Demographic factors that stimulated robust housing markets in past decades will weaken the future demand for new residential construction. The baby boom generation will reach middle‐age, well past the age of entry into the market. Changing social factors, such as marriage and divorce rates and womens labour force participation, will also have an effect on future housing demand. Four major trends, analysed in the paper, will increase demand for quality and increased investment per dwelling unit, thus offsetting the declining demand for new units. First, the baby boom generation will reach their peak lifetime earning period in the years ahead and their discretionary incomes will be large. Second, largely as the result of a benevolent public policy, the elderly have gained substantially in affluence, enabling them to live independently and to upgrade their physical housing standards. Third, it is expected that household technology will be increasingly demanded as time costs rise. Finally, the ‘serv...

Inflation: A Blessing or a Curse?:

Inflation has generated large wealth shifts among the various population groups involved in housing. The most significant shift is a gain of mortgage borrowers at the expense of lenders and savers. Homeowners, however, have not profited as uniformly as is widely believed, and landlords have generally suffered a sharp decline of net operating income. The severe cycles in residential building since the early 1970s reveal the destabilizing impact of inflation. The housing sector as a whole obtained a disproportionate share of total credit, but its growth and quality improvement did not accelerate apace. Credit expansion without equivalent expansion of real capital illustrates one of the striking maladjustments during inflation. Under a new regime of sustained price stability, housing will still be exposed to prolonged aftereffects of the inflation, notably the reconstruction of a shattered mortgage finance system. The recent trend toward larger and more luxurious dwellings will give way to leaner products. Whether the viability of the rental sector can be restored remains questionable. Under continued or renewed inflation, however, the prospects for housing are far worse.

The Changing Demographic Base of Housing Demand

This account of demographic forces affecting future housing demand is rendered in three parts. The first focuses on the projected decline in the number of young adults whose increase in the past two decades was a major factor in household formation. The second describes the slowing growth of households, the demand units for housing. The third portrays the continued shift in the composition of households in disfavor of the conjugal family, once the main source of rising demand for housing and especially for home ownership.

Socioeconomic Trends Affecting Household Formation

Some major changes in the life-style of Americans during the past generation have favored the demand for housing. The rising divorce rate has in many cases generated two separate households instead of one. The growing number of single women holding jobs has raised their capacity to pay for dwelling units of their own or to afford better units. Increasing numbers of married women who work outside the home have augmented family income and lifted the demand for higher-quality housing and for equipment that eases the burden of household management. The greater tendency of young single adults to move from the parents’ home to independent living quarters has given a boost to household formation. Broadened coverage of welfare programs and rising payments have supplemented low incomes and increased the ability of the poor to form households and enter the housing market. These changes, combined with the growing numbers of “never-married” persons of marriageable age and the surge of “twosomes” living together without the formality of marriage, have reduced the importance of the conjugal family among total households and, at the same time, increased housing demand.

The Housing of the Future

Demographic forces already under way and accelerating through the rest of this century will tend to weaken housing demand, though at a moderate degree. That prognosis, based on the analysis of previous chapters, raises a crucial question. Can one foresee countervailing forces that will offset or reduce the negative influence of demographic conditions?

Housing in People’s Life Cycle

As the household passes through the various stages of its life cycle, housing needs, preferences, and capacity to pay change appreciably. To accommodate change, households typically move from one home to another or they make physical or functional alterations of the unit they occupy. With nearly one-sixth of the population now moving to a different address each year, the typical household may reside in as many as seven different places in the course of its life cycle between the ages of 25 and 70. The change may require not more than moving to a new place on the same street or the far more disruptive transfer from Cincinnati to Los Angeles. Longdistance relocation is often called for by job promotion or the search for a better job or, for many of the unemployed, a job pure and simple. Even in these cases, the life cycle plays an important role since relocation is unevenly distributed over the various age groups of the adult population, being concentrated among the young and middle-aged.

Self-Sufficiency and Imperialism:

are only a few countries where strategic precautions are absent from the peacetime economic policy. What is the role of self-sufficiency in international relations? Is economic isolation a road to peace, or war? Is self-containment the promised remedy against imperialism, that is, against an aggressive trade and investment policy which, spurred on by ideas of national power and prestige, leads to international disturbances? Or are there factors inherent in the policy of self-sumciency which create nothing but another type of imperialism?