2002
Abstract:
This paper estimates a proportional hazard model of duration of residence in rental housing. The
study employs unique data from the BLS-CPI housing sample to construct the duration of rental
occupancy for metropolitan areas over the 1987-1998 period. American Housing Survey and other
metropolitan economic data are used to proxy time-varying covariates of duration of residence. The
paper employs an innovative semi-parametric estimation approach for group duration analysis of the
proportional hazard model, as originally proposed by Ryu (1994) and then modified by Deng [(1995),
(1997)].
Results of the analysis indicate that the duration of residence in rental housing varies significantly
across individual units and market segments. In fact, the duration of residence is highly time dependent,
given significant intertemporal variation in many of the housing and market covariates. The paper provides
evidence of high tenant turnover rates at about 3 years of residence. However, the turnover hazard curve
depends as well on market conditions and housing policy. For example, imposition of rent control can shift
the peak of the tenant turnover hazard curve to the left. Research findings further indicate that median
housing costs, public housing share of the rental stock, poverty rate, and African-American and
Hispanic share of tenant households are among those factors that positively affect tenant
turnover hazard rates and hence are negatively related to tenant residence duration. Elevator
buildings, unemployment rate, population growth and central city share of the rental stock
negatively affect tenant turnover hazard rates and hence are positively related with tenant
residence duration. Further, the estimated pattern of duration of residence was shown to vary
substantially across 33 large metropolitan markets.
Simulation results further indicate the sensitivity of duration of residence to housing
locational and structural characteristics. For example, findings for New York City indicate that
increased geographic dispersion of rental housing, as reflected in a reduction in the share of
rental stock in the central city to national average levels, would serve to boost cumulative tenant
turnover rates by 12 percent by the end of year three of the rental lease. Similarly, simulated
reduction in the density of rental housing, as reflected in downward adjustment in the share of NYC
buildings with seven or more stories to that of the national average level, would serve to increase
cumulative tenant turnover rates by 13 percent. The research provides new evidence as regards tenant
and market characteristics that determine the duration of residency. Clearly, an improved understanding
thereof offers new insights as regards fluctuations in tenant turnover, building occupancy, and rent flows, as
well as new confidence in pro forma assumptions critical to rental housing development.
