GGR 357 H1F Geography of Housing and Housing Policy

1. GGR 357 H1F Geography of Housing and Housing Policy May 14, 2008SESSION 2 TENURE CHOICE AND SOCIO-ECONOMIC INEQUALITIES DR. AMANDA HELDERMAN

2. Course web page http://individual.utoronto.ca/helderman/

3. Announcements • Text book sale • $15.00 • Exact change only • Room 50.57 • Additional opportunities?

4. Assignment • Individually written, unique research paper • Demographics and housing issues in Torontonian neighbourhoods • Immediately relevant topic to this course: Homelessness - extremely wealthy neighbourhood: Not appropriate choice of topic for obvious reasons • Do not exceed 1,500 words! • Hard copy and digital copy (word only) • ALL RELEVANT LIT SHOULD BE USED! • DUE DATE PAPER: Friday, June 20, 2008 • Drop box Office of Geography/ Program in Planning • Name student, student number, my name, course

5. Assignment • The paper should at least describe the demographic, socio-economic and physical characteristics of the area • Demographic and socio-economic characteristics of the neighbourhood: http://www.toronto.ca/demographics/ • Physical characteristics of the area: map • Writing courses • Be aware of waiting times! Contact the writing centre ASAP • Assistance from instructor (at least two weeks in advance): • By providing 1-page draft outline well in advance of appointment after class • By appointment after class • By email: Helderman@geog.utoronto.ca

6. Assignment • Paper preparations: very wise of you to start exploring paper themes! • Assignment description available online • Please embed all maps/ tables into the paper • Appropriate attention in the text • Use of appendices (if useful background information) • Illustrations for required elements such as physical structure (maps) and demographic characteristics (tables)

7. Timelines • MIDTERM EXAM: Monday June 2, 2008, this room • DUE DATE PAPER: Friday, June 20, 2008 • Drop box Office of Geography/ Program in Planning • Name student, student number, my name, course • June 23-27, 2008: FINAL EXAMINATIONS: • Exact date to be announced

8. Highlights from first session • Several slides are worth revisiting • Summary first session: • Definition of housing, complexity concept • Importance of housing • Modelling housing market behaviour

9. Defining Housing • Complexity of housing: all alternative definitions are applicable at the same time, some meanings are separated and confused  • Broad definition: BUNDLE OF SERVICES (for builders, owners and renters) • Physical facility • Shelter • Consumption of services: public, schools, environment, etc. • Location/ accessibility

10. The services delivered by housing Access to/ occupancy of housing delivers: • Shelter from the elements • Value/ wealth  equity for owners • Shelter from ‘taxes’  e.g. capital • Accessibility to services (e.g. schools) • Accessibility to work • Accessibility to neighbourhood • Social status • Right to privacy/ exclusion Services… Role of location!

11. The importance of housing • Housing is the built environment for intraurban migration and mobility • Housing competes with other uses in the urban land market for accessibility and space • Housing is the principal mechanism through which urban neighbourhoods change, and one of the stimulants of change (session on neighbourhood transitions) • Moves of households/ activities, demographic change • New (demographic/ economic/ social/ cultural) developments • Aging of real estate • Fluctuations in house prices

12. Models for housing market behaviour Traditionally in terms of streams of relocations, and origins and destinations (aggregate patterns): • Gravity models – based on the characteristics of places • Size and distance between places • Push/pull models – based on flows of individuals, decisions • (Recurrent) Markov Chains – based on matching process between households and housing Two more recent approaches: • Micro-economic approaches (Sjaastad) – based on the costs and returns of human migration (monetary and non-monetary costs) • Life cycle/ Life course perspective – based on life events that trigger a change in one of the parallel careers, individual and micro-economic

13. Life course, parallel careers Cohabitation Child birth Remarriage Divorce/ separation Child birth Widowhood HH Jobchange Jobchange LB Enrolling into higher education ED HS

14. Life course: paradigm shift in the social sciences New! • Convergence of theory and empirical work • Devoted attention to the individual household • Brought the topic of residential relocations into the centre of housing studies • Linking individual action with social change and social structure • Demographic events introduced as milestones and critical transitions in people’s lives • UNIVERSAL: these events apply for almost everyone, and occur everywhere and throughout history

15. Introduction housing tenure (new topic) • Housing tenure choice • Individual advantages/ disadvantages to homeownership • Socio-economic inequalities • Separate markets • Mechanisms of widening socio-economic gaps

16. Introduction • Advantages of homeownership for governments • Policy instruments • Literature discussion

17. Housing tenure choice • 2nd step in the relocation decision (see Brown & Moore, 1970) • Destination choice models • Life course stage • Household composition and socio-economic characteristics • Housing type • Level of housing consumption • Opportunity structure: • Local housing stock • Local housing market conditions

18. The values of housing • Consumption value • Investment value • Policy importance

19. Means-end model Basic needs Values Goals and objectives Intentions Household characteristics Current situation Choice behaviour

20. Value Consequence Attribute Privacy More space Five rooms Values and consequences

21. Housing tenure and the life course Some rent while being young… … while others need rental housing throughout their lives.

22. Individual advantages to homeownership • Building up equity from a home • Housing quality • Customized aspects/ alterations • Control of individual housing situation/ independence • Continuity/ stability • Status • Emotional value

23. Individual disadvantages to homeownership • Financial risk: housing market • Financial risk: labour market position • Responsibility for maintenance • Impedes residential relocations: • Financial commitment • Transaction costs • Sense of security, personal environment • Emotional attachment • Stable households

24. Socio-economic inequalities • Building up equity • Spatial concentration of opportunities • Quality of housing and neighbourhoods • Social mobility • Separate markets

25. Separate markets • Few moves between the rented and owner-occupied segments • Interruption in building up equity • Maintaining housing quality • Rising incomes and housing consumption needs during a large period of an individual’s life course • Equity facilitating new purchase Based on: Helderman, 2007

26. Moving from rent to own • Increase in housing budget • Increase in housing consumption needs • Higher quality home • Higher quality neighbourhood • Personal space, free to adjust to personal preferences • Preference to own

27. Moving from own to rent • Decrease in housing budget • Decrease in housing consumption needs • Urgent need to relocate • Desire to consume equity • Preference for renting Motives related to disruptions and changes in the family life cycle or life course patterns (divorce, separation, aging, health issues, change of jobs)

28. Levels of homeownership (%) From census 1991, 1996 & 2001: Statistics Canada

29. “American dream” • Active policy • Surge mid-1990s • From 64% in 1994 to 69% in 2004 • Homes important part of people’s net worth • Affecting people’s spending, working, saving and moving decisions • Creative financing options/ more flexible mortgages available • Shift in demographics

30. Trend homeownership US

31. Socio-economic inequalities (2) The income gap • Income of owners has increased 5% while income of renters has decreased about 4% between 1984-1999 • The income gap increases 1% per year The gap is widening

32. Income spent on housing

33. Socio-economic inequalities (3) The wealth gap • The average wealth of homeowners went from 29 times that of renters to 70 times that of renters between 1984-1999 • Note: on average 38% of homeowners’ wealth is tied up in the home The gap is widening

34. Mechanisms of widening socio-economic gaps • Increase in house prices • Increase in rents • Government policy

35. Advantages of homeownership for governments • Stimulate individuals building up equity from their homes • Stimulate capital markets • Increase supply of higher quality, owner-occupied housing stock • More adequate match of supply and demand • Flexibility of labour markets? (Oswald, 1999; Helderman, 2006)

36. Policy instruments 1) Tax incentives: • No tax on capital gains from house sales • RRSP Home Buyers’ Plan (HBP) • Flexible Down Payment Plan • Lower Monthly Payments • Purchase Plus Improvements • Land Transfer Tax (LTT) Rebate No housing related tax concessions for renters! • Ontario waives land transfer taxes, may in theory be beneficial to both owner-occ. and rent.

37. Policy instruments (2) 2) Subsidies 3) Rent control 4) Municipal regulations Key: The ability to pay rents. The question remains…  What would make rental investments sufficiently profitable for developers?

38. Literature session 3 • Hulchanski, J.D. (2005), A tale of two Canadas: homeowners getting richer, renters getting poorer. In: J.D. Hulchanski & M. Shapcott (eds. 2005), Finding room. Policy options for a Canadian rental housing strategy. Chapter 4. p. 81-88. • Oswald, A.J. (1999), The housing market and Europe’s unemployment: a non-technical paper, mimeo University of Warwick. • Coulson, N.E. & Fisher, L.M. (2002), Tenure choice and labour market outcomes. Housing Studies, 17(1), pp. 35-49. • Helderman, A.C. (2007), Once a homeowner, always a homeowner? An analysis of moves out of owner-occupation. Journal of Housing and the Built Environment (22), pp. 239-261.

39. Literature discussion Hulchanski & Shapcott, chapter 4: Housing tenure represents the divide between the two very different types of households in terms of income and wealth (Hulchanski, 2004, p. 85)

40. Literature discussion (2) Oswald: We can put Europe back to work by reducing homeownership (Oswald, 1999, p.2) Migration (long distance moves) is necessary for individual flexibility on the labour market so that advantage may be taken from economic opportunities (Helderman, 1st class)

41. Literature discussion (3) Why do the papers of Oswald and Coulson & Fisher have totally separate outcomes?

42. Same hypothesis, different outcomes • Methodology: bivariate/ multivariate • Household situation/ life course stage • Dynamic/ static modelling • Assumptions: general/ partial models • Self-selection bias

43. Literature next session: Intergenerational transmission of homeownership - Henretta, J.C. (1984), Parental status and child’s home ownership. American Sociological Review 49, pp. 131-140. - Jenkins, S.P. & A.K. Maynard (1983), Intergenerational continuities in housing. Urban Studies 20, pp. pp. 431-438. Classics!

44. Literature next session: Intergenerational transmission of homeownership • Helderman, A.C. & C.H. Mulder (2007), Intergenerational transmission of homeownership: the roles of gifts and continuities in housing market characteristics. Urban Studies 44 (2), pp. 231-247.