Viggo Nordvik

Moving Costs and the Dynamics of Housing Demand

It is well established that moving costs make households adjust their housing consumption far less frequently than they would have done in a world in which relocation was costless. This paper adds to our understanding of the dynamics of housing demand by constructing a life-cycle model of housing demand on which several numerical experiments are performed. Among other things, it is shown how the sign of price elasticities may be indeterminate because of changes in moving careers induced by price changes. The paper also demonstrates that planned (endogenous) moving activity and stochastic forced moves should be analysed within a common analytical framework. One simple version of such a common analytical framework is presented and discussed.

The Duration of Housing Allowance Claims and Labour Market Disincentives: The Norwegian Case

Housing allowances in Norway are meant to enable low-income households to increase, or maintain, their housing consumption. In order to identify low-income households and to ensure a desirable vertical equity, the allowances decrease as income rises. The marginal withdrawal of housing allowances as income increases is quite high. Interacting with the tax system this might potentially produce a dependency culture and a depressing effect on the supply of labour.A dependency culture would yield long spells as recipients of housing allowances. This paper demonstrates that this is not the case for single parents and families with children. Around 30 per cent of the receivers from these groups drop out of the system every year. Furthermore the hazards (probability of dropping out) seem to be independent of the length of the claim.

Tenure flexibility and the supply of private rental housing

Abstract This paper examines the decision by an owner on whether to sell or let a dwelling not used by the owner’s family. The paper shows that both qualitatively and quantitatively different conclusions are drawn from an analysis under certainty compared to one within a dynamic stochastic framework, even when the owners are assumed to be risk neutral. The paper emphasises that when the decision on selling or letting is analysed, the value of future flexibility of the ‘let’-strategy should be taken into account. The value of future flexibility might be denoted a real option value. When account is taken of the real option value, the reservation rent of a potential landlord may be lower than the user cost of a similar dwelling.

On the Path to Homeownership: Money, Family Composition and Low-income Households

In Norway, as in many other countries, homeownership is encouraged politically, and a majority of the households become homeowners at some stage in their life cycle. Many households move house when circumstances change, and it is often at this point that they also make their tenure choice. This paper employs a bivariate probit framework to model the transition rate from renting into homeownership. Using a sample of initial renters, subsequent tenure choice is analysed jointly with the stay-move decision. A particularly important question in this context is whether low-income households face differential constraints on entering owner occupation that could be addressed by policy change. The empirical model includes financial characteristics, household characteristics and changes in household characteristics as explanatory variables. Changes in household composition are particularly important in explaining variations in both tenure choice and mobility. Hence, the common practice of estimating housing market behaviour using a panel of intact households potentially obfuscates important determinants of that behaviour. The paper proceeds by using the equivalent of a Chow test to show that a hypothesis of equal coefficients in samples of low- and high-income households is firmly rejected. Thus low-income households do behave differently. Short-term variations in income appear to have little effect on peoples capacity to enter owner occupation. However, low-income households are more dependent on past savings for successful entry. This suggests a rather different policy approach if owner occupation is to be expanded.

A Primer on the Building Economics of Climate Change

Climate change will entail new conditions for the construction industry. Knowledge about the implications of climate change on the built environment will be of the utmost importance to the industry in years to come. A building is a ‘long lasting’ durable asset that is changed over time due to exogenously imposed strains and by actions. The built environment has an expected lifetime varying from 60 to more than 100 years. Hence, the building economics of climate change should be treated within a dynamic analytical framework that explicitly allows for changes in the information sets over time. The building stock of the future consists of the building stock of today and of new construction. In the future, parts of the present building stock will be adapted to changes in the environment, while some parts will be kept as they are. Analysis of how building stock is affected by future climate change should handle this diversity. This can be done through the use of a putty-clay model. Uncertainty of what kind of climate regimes will prevail in the future enhances the profitability of actions that increase future flexibility. Hence, the real option approach to building economics is utilized.

Prices and price expectations in the market for owner occupied housing

Abstract Many researchers working with analyses and predictions of the prices of owner occupied houses have found that econometric models based on ‘economic fundamentals’ fail to explain more than a fraction of the movements of the prices. This is especially the case in periods of rapid change. Often, this failure is attributed to psychological factors such as price expectations among the market participants. This paper compares observed market prices and equilibrium prices under three different hypotheses of the formation of price expectations. The results from the investigations indicate that price expectations are formed through an extrapolation of the trend in house prices rather than through a process based on knowledge of the structure of the housing market, economic fundamentals and demographic trends.

Vacancy Chain Models: Do They Fit into the Economist's Toolbox?

Local housing markets are typically “thin”. This implies that vacant housing units are a scarce resource in the local housing market. Vacancy chain models constitute a class of models that explicitly link mobility and the production of vacancies within a housing market. This paper begins with the observation that this class of models is utilized to a quite low degree in the economic analysis of local housing markets. Economic methodological literature is used to discuss the reasons for this. One reason is that these models, quite unnecessarily, are presented as having a non‐behavioural basis. As economics is about the behaviour of deliberately acting agents, this way of presenting vacancy chain models is an obstacle to communication with economists. Although some shortcomings of vacancy chain models are identified and discussed here, it is concluded that such models should be included in the toolbox of economists analysing local housing markets.

From the Kitchen Floor to the Basement - Sharing Arrangements in two Centuries

Letting part of the home is one form of sharing. Such arrangements can be found in both rental and owner-occupied housing units. In this article we discuss the mechanisms that generate sharing arrangements. In particular, we argue that economic strain rather than affluent space leads to households being let. Furthermore, we note that there is often some family or other type of relationship between those who let and their tenants/lodger. We therefore believe that there are also other, non-monetary, arguments behind the decision to let and the choice of tenant/lodger. We discuss these propositions in the light of two quite different studies: the first, an ethnological study of lodgings at the end of the 19th century, the second, an econometric study of letting of secondary dwellings in single-family houses at the end of the 20th century. Despite the enormous differences between the two points in time, we claim that there are structural similarities between the mechanisms that generated the lodging phenomena...

Survival and Exits in Neighbourhoods: A Long-Term Analyses

Neighbourhoods form a frame for our lives. At the same time, neighbourhoods are themselves formed by mobility into and out of them. This paper studies who stays in and who leaves in two districts of Oslo. The empirical analysis is based on a survival model, estimated on a 10-year long longitudinal data-set, because neither theory nor prior studies yield sufficient guidance to build an empirical model. We propose a way to nest and test survival models and utilise this in the model specification. We find that the intensity of the outflow of native Norwegian from an area is not to any substantial degree related to the size of the immigrant population. Hence, our results do not confirm the widespread narrative of white flight as a response to an increased immigrant population in areas of Oslo. Instead, the larger part of the outflow is explained by variables related to the life-course of families. Results do not suggest that increasing the ethnic or income diversity of Oslo neighbourhoods would substantially increase outflows of native Norwegians.

Regional Patterns in Vacancies, Exits and Rental Housing

Utilization of the housing stock is determined by the interplay between a slowly adjusted housing stock and changing regional patterns. Temporal mismatch between adjustments of the housing stock and regional change may lead to variations in the incidence of vacant housing units, over time and over space.Within this context this article analyses the determinants of exit rates from the housing stock in use and what determines the utilization of vacant housing units. This article demonstrates empirically that changes in the stock of vacancies in the housing stock within a municipality increase as one moves from the most central parts of the country towards the less central parts. Furthermore, the growth in the stock of vacant housing correlates positively with the share of inhabitants aged 65 years or over. We relate these empirical findings to a particular form of centralization which has taken place in Norway over the last 50 years: upon leaving the parental home, young people have often left the peripheral parts of the country.As their childhood homes were still inhabited by their parents, they did not leave any vacant housing units behind them.After some 30—50 years, the parents have died. Hence, a centralization process may produce vacant housing units — with a time lag of up to 30—50 years.