Households' willingness to pay for public housing

J. van Ommeren, A.J. van der Vlist

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

In the presence of price controls, nonmarket housing allocation mechanisms such as queueing prevent households from revealing their marginal willingness to pay for housing through market prices. We derive the households' marginal willingness to pay using the intuitive idea that the length of the queue for a specific house reflects the households' willingness to pay for housing characteristics. We apply our methodology to public housing in the Amsterdam Metropolitan area and show that, on average, the households' marginal willingness to pay for a unit of public housing is close to its marginal costs. This suggests that the welfare loss of public housing through distortions in housing supply is rather limited and is mainly through distortions in housing demand. We provide indirect evidence of the latter by showing that queueing induces inefficient matching of households and housing.
Original languageEnglish
Pages (from-to)91-105
JournalJournal of Urban Economics
Volume92
Issue numberMarch
DOIs
Publication statusPublished - 2016

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public housing
willingness to pay
housing
housing supply
marginal costs
market price
agglomeration area
welfare
household
public
Household
Willingness-to-pay
Public housing
demand
methodology
metropolitan area
evidence
Queueing

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van Ommeren, J. ; van der Vlist, A.J. / Households' willingness to pay for public housing. In: Journal of Urban Economics. 2016 ; Vol. 92, No. March. pp. 91-105.
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Households' willingness to pay for public housing. / van Ommeren, J.; van der Vlist, A.J.

In: Journal of Urban Economics, Vol. 92, No. March, 2016, p. 91-105.

Research output: Contribution to JournalArticleAcademicpeer-review

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AU - van der Vlist, A.J.

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AB - In the presence of price controls, nonmarket housing allocation mechanisms such as queueing prevent households from revealing their marginal willingness to pay for housing through market prices. We derive the households' marginal willingness to pay using the intuitive idea that the length of the queue for a specific house reflects the households' willingness to pay for housing characteristics. We apply our methodology to public housing in the Amsterdam Metropolitan area and show that, on average, the households' marginal willingness to pay for a unit of public housing is close to its marginal costs. This suggests that the welfare loss of public housing through distortions in housing supply is rather limited and is mainly through distortions in housing demand. We provide indirect evidence of the latter by showing that queueing induces inefficient matching of households and housing.

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