Quantitative Economics: Nov, 2013, Volume 4, Issue 3

Estimating a model of excess demand for public housing

Judy Geyer, Holger Sieg

The purpose of this paper is to develop and estimate a new equilibrium model
of public housing that acknowledges the fact that the demand for public housing
may exceed the available supply. We show that ignoring these supply side restric-
tions leads to an inconsistent estimator of household preferences. We estimate
the parameters of the model based on a unique panel data set of low-income
households in Pittsburgh. We find that public housing is an attractive option for
seniors and exceedingly poor households headed by single mothers. We also find
that for each family that leaves public housing there are, on average, 3.8 families
that would like to move into the vacated unit. Simple logit demand models that
ignore supply side restrictions cannot generate reasonable wait times and wait
lists. Demolitions of existing units increase the degree of rationing and potentially
result in welfare losses. An unintended consequence of demolitions is that they
increase racial segregation in low-income housing communities.
Keywords. Excess demand, rationing, search, equilibrium analysis, welfare anal-
ysis, enriched sampling, computational general equilibrium analysis.
JEL classification. C33, C83, D45, D58, H72, R31.

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