Journal of Urban Economics

Volume 24, Issue 2 , September 1988, Pages 173-185

Title: The income elasticity of demand for single-family owner-occupied housing: An empirical reconciliation*1

Author: Oskar R. Harmon, University of Connecticut

Received 27 January 1986; Revised 23 July 1986.

Abstract

Past studies estimate the permanent income elasticity of demand for single-family owner-occupied housing to range from 0.14 to 1.5, a range much too broad to be of any use for solving policy questions. Data from the Panel Study of Income Dynamics are used herein to test the sensitivity of this income elasticity to several factors. The results suggest that differences in sample population with respect to duration of housing tenure explain a large portion of the variation in the estimates of this elasticity. The paper concludes that for short-run applications the probable value of this elasticity is approximately 0.70 and for long-run applications the probable value of this elasticity might best be taken as approximately 1.00.