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ABSTRACT
This study analyses t h e economic aspects of housing t e n u r e choice i n New Zealand, 1960-80. The a n a l y s i s proceeds by way of t h e building, r e f i n i n g and estimation of a model of household t e n u r e choice, using a considerable body of micro-level d a t a and aggregate time s e r i e s .
I t is argued t h a t t h e household f a c e s a wealth c o n s t r a i n t , a dual budget c o n s t r a i n t , and minimum dwelling standard c o n s t r a i n t s , and t h a t t h e household's t e n u r e choice depends on t h e i n t e r a c t i o n o f t h e s e c o n s t r a i n t s and i t s preference s e t . The budget c o n s t r a i n t i s a dual c o n s t r a i n t
because t h e t r u e economic p r i c e of buying r e l a t i v e t o t h a t of r e n t i n g
.
g e n e r a l l y d i f f e r s from t h e ' o u t l a y ' p r i c e of buying r e l a t i v e t o t h a t of r e n t i n g . The o u t l a y prTces of housing s e r v i c e s a r e important f o r house- holds with l i m i t e d c u r r e n t income a v a i l a b l e f o r housing u n l e s s t h e house- h o l d ' s wealth c o n s t r a i n t i s unusually loose. Considerable emphasis is placed on t h e modelling of t h e p r i c e s of housing s e r v i c e s . A sub-model of landlord behaviour and t h e examination of t h e operation of t h e p r i v a t e r e n t a l housing market a r e d i r e c t e d a t explaining t h e path over time of . urban New Zealand r e n t s .
Sources o f d a t a a r e a s follows. In considering p r i c e s and t h e various c o n s t r a i n t s on t e n u r e choice I employ my o m survey d a t a ,
c o l l e c t e d in Auckland, and time-series d a t a f r o m t h e New Zealand Depart- ment of S t a t i s t i c s (NZDS) and t h e New Zealand Valuation Department,
t o g e t h e r with c r o s s t a b u l a t i o n d a t a from various sources. I make.use f o r t h e f i r s t time ( f o r t h e s e purposes) of a body of d a t a c o l l e c t e d by t h e NZDS
-
t h e i r Household Sample Survey d a t a-
t o estimate a c r o s s - s e c t i o n a l t e n u r e choice function. For t h e examination of n a t i o n a l t e n u r e choice t r e n d s I had t o construct my own estimates of t h e p r i v a t e s e c t o r home- ownership r a t e .The c h i e f conclusion of t h i s study is t h a t lack of wealth
c o n s t r a i n s t h e l a r g e majority of lunwillingl p r i v a t e t e n a n t s (who a r e about t h r e e - q u a r t e r s of a l l p r i v a t e t e n a n t s ) t o r e n t . Both interview evidence and c r o s s - s e c t i o n a l econometric work support t h i s conclusion.
A second major finding i s t h a t t h e impact of t h e budget c o n s t r a i n t on household t e n u r e choice has v a r i e d considerably over time but i n terms of economic p r i c e s , buying has been c o n s i s t e n t l y (over t h e l a s t two decades) cheaper than r e n t i n g f o r t h e t y p i c a l tenure-choosing household with a moderate marginal r a t e of time preference and a moderate planning period. In times of r a p i d dwelling a p p r e c i a t i o n t h e economic p r i c e of buying r e l a t i v e t o t h a t of r e n t i n g is p a r t i c u l a r l y low. In c o n t r a s t , t h e o u t l a y p r i c e of buying (comprising c o s t s i n t h e c u r r e n t period) has been considerably g r e a t e r t h a n t h e o u t l a y p r i c e of r e n t i n g , e s p e c i a l l y when nominal i n t e r e s t r a t e s have been high, and t h i s f a c t has undoubtedly d e t e r r e d a s i g n i f i c a n t proportion of households from buying.
F i n a l l y , t h e d e c l i n e i n t h e p r i v a t e s e c t o r home-ownership r a t e between 1961 and 1976 was found t o be l a r g e l y due t o changes i n t h e lage:marital status:household s i z e 1 s t r u c t u r e of t h e population of
households. These changes outweighed t h e n e t e f f e c t of economic f a c t o r s which worked t o r a i s e t h e home-ownership r a t e u n t i l 1976.
