Modelling the Choice of Tenure and Building Type

Abstract

A multinomial logistic (MNL) model and a naive nested logistic model are estimated to relate differences in household size, age, income and housing prices to differences in the choice of tenure and building type. The estimated models show that the demand for lower-density options decreases with a reduction in household size and increases with increasing age and real income. Higher rents increase the demand for owner-occupied single-family detached houses. Higher price levels for the ownership option shift demand toward all of the higher-density options, particularly toward high-rise rental apartments. The key assumption underlying the MNL model is examined and shown to not hold true. However, the differences in the predictions made by the two models are too small to matter in the study of the choices among the major building types. Issues regarding the choice of models are discussed in the conclusions.

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