Equilibrium Model of Housing Choice for Heterogeneous Households under Public Rental Housing Policy

Abstract

The rapid development of urban rail transit system leads to the rising land rent and housing rent along the rail transit line. In order to respond to housing demand for low-income households, the public rental housing policy came into being. Public rental housing, with the advantage of lower rent than commercial housing, has become the primary choice for low-income households. However, the preset location of public rental housing is usually in the suburbs, separating the workplace and residence, which increases in travel cost. Consequently, it is particularly necessary to study the effect of public rental housing on the utilities of heterogeneous households from the perspective of transportation, and an equilibrium model of housing choice for heterogeneous households under public rental housing policy has been suggested in this paper. The result shows that the change in average operating speed of the rail may lead to the difference in urban residential formation and the increased speed of the rail may not be able to eliminate the location disadvantage of public rental housing. Furthermore, we find that ultra-limit public rental housing with the remote location is detrimental for low-income households. The model explicitly considers the interaction among the government, property developers, and heterogeneous households in the housing market, and can be utilized as an instruction for the future sustainable development of public rental housing.