Discrete Choice Modelling of Urban Housing Markets: A Critical Review and an Application

The housing choice literature is a vast area of housing research which has resulted in giant leaps forward in recent years in terms of its econometric modelling. This is due in large part to the significant increases now available in computing power allowing researchers to combine the latest advances in theory with empirical application. This paper brings together and critically reviews the housing choice literature and techniques that have been used to model the household's housing choice decision. The basic multinomial logit model is reviewed alongside the more recent advances in discrete choice modelling-the nested multinomial logit model and the heteroscedastic extreme value model. The various techniques are illustrated using data from the Australian census of 1986 and 1996 to model housing choice in Sydney. The results show that careful consideration must be given to the assumptions underlying any chosen modelling technique if one is not to draw misleading conclusions from the analysis.

[1]  John M. Quigley,et al.  Housing Demand in the Short Run: An Analysis of Polytomous Choice , 1976 .

[2]  Lung-fei Lee,et al.  Estimation of some limited dependent variable models with application to housing demand , 1978 .

[3]  Harvey S. Rosen,et al.  Housing decisions and the U.S. income tax: An econometric analysis , 1979 .

[4]  M. King,et al.  An econometric model of tenure choice and demand for housing as a joint decision , 1980 .

[5]  Thomas P. Boehm,et al.  Tenure choice and expected mobility: A synthesis , 1981 .

[6]  Thomas P. Boehm,et al.  A Hierarchical Model of Housing Choice , 1982 .

[7]  R. Krumm.  Household tenure choice and migration , 1984 .

[8]  John M. Quigley,et al.  Consumer choice of dwelling, neighborhood and public services☆ , 1985 .

[9]  William A. V. Clark,et al.  An Empirical Test of a Joint Model of Residential Mobility and Housing Choice , 1985 .

[10]  Moshe Ben-Akiva,et al.  Discrete Choice Analysis: Theory and Application to Travel Demand , 1985 .

[11]  J. Henderson,et al.  Tenure Choice and the Demand for Housing , 1986 .

[12]  Andrew Daly,et al.  Estimating “tree” logit models , 1987 .

[13]  Axel Börsch-Supan,et al.  Econometric Analysis of Discrete Choice , 1987 .

[14]  Axel Börsch-Supan,et al.  On Discrete Choice Models of Housing Demand , 1988 .

[15]  P. Zorn.  An analysis of household mobility and tenure choice: An empirical study of Korea , 1988 .

[16]  Axel Börsch-Supan,et al.  Panel data analysis of housing choices , 1990 .

[17]  Nuzhat Ahmad.  A Joint Model of Tenure Choice and Demand for Housing in the City of Karachi , 1994 .

[18]  Yong Tu,et al.  Economic perspectives on the structure of local housing systems , 1996 .

[19]  Yong Tu,et al.  A Two-stage Housing Choice Forecasting Model , 1996 .

[20]  Carol Rapaport,et al.  Housing Demand and Community Choice: An Empirical Analysis , 1996 .

[21]  B. Badcock,et al.  Home Truths: Property Ownership and Housing Wealth in Australia , 1996 .

[22]  Cheol-Joo Cho.  Joint Choice of Tenure and Dwelling Type: A Multinomial Logit Analysis for the City of Chongju , 1997 .

[23]  F. Koppelman,et al.  Alternative nested logit models: structure, properties and estimation , 1998 .

[24]  Richard T. Carson,et al.  Combining Sources of Preference Data for Modeling Complex Decision Processes , 1999 .

[25]  David A. Hensher,et al.  HEV Choice Models as a Search Engine for the Specification of Nested Logit Tree Structures , 1999 .

[26]  Andrejs Skaburskis,et al.  Modelling the Choice of Tenure and Building Type , 1999 .

[27]  Kamhon Kan,et al.  Dynamic Modeling of Housing Tenure Choice , 2000 .

[28]  Frank S. Koppelman,et al.  Alternative nested logit models: a response to comments by Andrew Daly on an earlier paper of Frank Koppelman and Chieh-hua Wen , 2001 .

[29]  Andrew Daly,et al.  Alternative tree logit models: comments on a paper of Koppelman and Wen , 2001 .

[30]  J. Yates.  The rhetoric and reality of housing choice: The role of urban consolidation , 2001 .

[31]  Juan de Dios Ortúzar.  On the development of the nested logit model , 2001 .

[32]  F. Koppelman,et al.  The generalized nested logit model , 2001 .

[33]  Dietrich Earnhart,et al.  Combining Revealed and Stated Data to Examine Housing Decisions Using Discrete Choice Analysis , 2002 .

[34]  W. Greene,et al.  Specification and estimation of the nested logit model: alternative normalisations , 2002 .

[35]  Yannis M. Ioannides,et al.  STRUCTURAL ESTIMATION OF RESIDENTIAL MOBILITY AND HOUSING TENURE CHOICE* , 2006 .

[36]  Frank S. Koppelman,et al.  CLOSED-FORM DISCRETE-CHOICE MODELS* , 2007 .