Another Look at Effects of “Adults-Only” Age Restrictions on Housing Prices

Another Look at Effects of “Adults-Only” Age Restrictions on Housing Prices This study reexamines the price effects of age restrictions on housing prices. Our data cover a period when the housing market is taking a steep downturn. We argue that, when housing prices are falling, seniors are more likely to avoid investing in housing for at least two reasons. First, seniors are relatively more sensitive to their immediate equity loss than younger homeowners, mainly due to the limited remaining lifetime over which they can afford to wait; second, age-restriction acts as a luxury good, with seniors not willing to pay for reduction in neighborhood uncertainty, eliminating buyer demand for this segment of the population. If this “larger demand loss” outweighs the positive externality of the reduction in neighborhood uncertainty during the market downturn, we would observe that age-restrictions reduce property values. Using data from Broward County, Florida for the years of 2005–2007, we find a significant discount in residential condominium prices due to age-restrictions. In particular, we find that imposing age-restriction on properties decreases housing prices by 17.9% during the period May 2005 to April 2006, while the discount is worse, 22.7%, during the later period May 2006 to May 2007. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Another Look at Effects of “Adults-Only” Age Restrictions on Housing Prices

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Publisher
Springer US
Copyright
Copyright © 2011 by Springer Science+Business Media, LLC
Subject
Economics / Management Science; Regional/Spatial Science; Finance/Investment/Banking
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-011-9317-0
Publisher site
See Article on Publisher Site

Abstract

This study reexamines the price effects of age restrictions on housing prices. Our data cover a period when the housing market is taking a steep downturn. We argue that, when housing prices are falling, seniors are more likely to avoid investing in housing for at least two reasons. First, seniors are relatively more sensitive to their immediate equity loss than younger homeowners, mainly due to the limited remaining lifetime over which they can afford to wait; second, age-restriction acts as a luxury good, with seniors not willing to pay for reduction in neighborhood uncertainty, eliminating buyer demand for this segment of the population. If this “larger demand loss” outweighs the positive externality of the reduction in neighborhood uncertainty during the market downturn, we would observe that age-restrictions reduce property values. Using data from Broward County, Florida for the years of 2005–2007, we find a significant discount in residential condominium prices due to age-restrictions. In particular, we find that imposing age-restriction on properties decreases housing prices by 17.9% during the period May 2005 to April 2006, while the discount is worse, 22.7%, during the later period May 2006 to May 2007.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: May 10, 2011

References

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