Projecting Demand for Rental Homes in Denmark

Abstract

For a number of years, homeownership rates have been increasing along with increasing GDP per capita in most European countries, but not in Denmark after 2000. The present paper takes a closer look at the Danish development, and gives some indications of the future demand for rental housing. The results indicate that future rental demand will come from an increasing share of persons of old age and young people in education plus a tendency for more ‘single living’. However, with increasing real incomes for a broad ‘middle-income’ group, the projection gives a higher homeownership rate in the future. It is believed that the structural traits found in the Danish housing market and the technique employed is of interest to housing researchers in other countries.

Key Words:

• Housing
• demand
• rental market
• homeownership

Acknowledgements

The paper is written as a part of the Centre for Housing and Welfare – Realdania Research Project. Economic support from Realdania is acknowledged. The author also thanks stud.oecon. Gintautas Bloze for valuable assistance in data handling.

Notes

¹Average years. The translation from Danish is sygedagpenge = on sick-leave, kontanthjælp = social pensioner, førtidspension = pre-pensioner, folkepension = old age pensioner, efterløn = early old age pensioner, selvstændig = self-employed, erhvervskompetencegivende uddannelse = with final education.

***. Pseudo R² = 0.26.

***. Pseudo R² = 0.28.

***. Pseudo R² = 0.07.

¹The shown probabilities are the means of predicted probabilities, which are equal to tenant fractions calculated on the observations.

¹Calculated on the 2004 sample weights

²As calculated from column 2 probabilities.

1. Where dwellings with cooperative ownership (in Danish: andelsboliger) are counted as owned and not as rented dwellings.

2. In Denmark, the average number of rooms is below three in rented dwellings and above four in owned dwellings. Hansen and Skak (2008) provide a theoretical model that predicts smaller rental dwellings.

3. The data are drawn from various public register files with information about dwelling and household characteristics. Income data are from the annual tax base statistics, which – with few exceptions – are reported by employers, etc.

4. These elasticities seem high when compared with those obtained by Struck and Marshall (1975) and Carliner (1974) for the American housing market.

5. The survey has no information on incomes.

6. This is the forecast adjustment to equilibrium proposed by Hendershott and Weicher (2002).

7. Due to the non-linearity of the logit function this is more than the income elasticity of table 2b indicates.

8. Figures with an A can be found in the appendix.

9. Because the 20 per cent sample has been cleaned for unusual observations, the numbers and calculations presented in table 6 are not exact. However, after multiplying by 5, they should give an indication of the future demand for rented dwellings.