The tenant's choice of subsidized housing in Hawaii

Abstract

Recently, a considerable number of studies have been focused on housing markets. The literature on housing can be broadly classified into three categories: the determination of housing expenditures, the choice of residential location and the characteristics of a dwelling, and the choice of owner-occupancy or rental. No work has yet been done on the choice of two "close" substitutes--public rental housing and subsidized privately-owned rental housing. To initiate an effort in this area, the principal objective of this study is to examine some of the determinants in the choice of these two types of subsidized rental housing. The other objective is to draw policy implications from the empirical results. The logit model (estimated by the maximum likelihood method) is used because of its superiority over the linear probability model. The likelihood ratio test is used instead of the t test because the former appears to be more statistically appropriate. Using primary data compiled from tenants' records and census data, the model was applied to estimate tenants' choice of public housing and privately-owned subsidized housing. The estimation equations are stratified according to elderly or nonelderly, working or nonworking status. Results of the estimation equations show that rent, crime rates, race, and distance to work are statistically significant with the expected signs. While income has been found to be negatively related to the choice of public housing (and statistically significant), there is no significant correlation between the number of minors and choice of public housing. The own and cross elasticities of housing choice are also estimated. Both these elasticities are found to be relatively small in most cases for the crime, race, and distance to work variables. On the other hand, the elasticities for the rent and income variables are relatively greater. The implication of these findings is that rent is an important policy variable among others. The result has also shed some light on some specific policies. By their nature, the estimates obtained are specific to Hawaii. The degree of generality of these results can be tested only by repeating the application of the model to other jurisdictions.