Lift Installation and Housing Prices

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Journal Title
Journal ISSN
Volume Title
School of Business | Master's thesis
Date
2020
Major/Subject
Mcode
Degree programme
Economics
Language
en
Pages
39 + 10
Series
Abstract
The number of the elderly citizens in increasing from 1.2 million to 1.5 million in the next ten years. The policy-makers are executing actions to ensure decent housing circumstances for the physically restricted. One of these actions is to grant subsidies for lift installations to residential block of flats. The Finnish legislation determines the higher floor tenants to pay a higher share of the installation costs. However, the economic effects of the lift installations have not been answered in the literature. If the property value increase would exceed the installation costs, a threat of an undesirable outcome of the subsidy would become prominent. Moreover, if the property prices would not increase as the floor level increases, the legislation would turn out unequal. This thesis studies how much the lift installations affect the housing prices by utilizing a hedonic pricing model with difference in differences setup. I use an extensive dataset provided by the Central Federation of Real Estate Agencies in Finland containing the majority of transactions in blocks of flats between years 2000-2018. The main finding is two percent price premium due to lift installation. On average, it brings between two and four thousand euros for the apartment owner that has an average-priced apartment in a block of flats without a prior lift. My evidence suggests that the effect of lift installation on prices increases as the floor level increases until the fifth floor. No evidence about heterogeneous effects by municipalities were found. An exception is Oulu, where the effect has been six percent. This study mitigates the threat of undesirable outcomes of the policy. The subsidy recipients are still facing higher installation costs compared to property value increase. In addition, the study indicates the current legislation to treat the households more equally compared to evenly allocated costs. However, the cost allocation could be improved more equal by flattening increase rate of multipliers in the cost allocation principle.
Description
Thesis advisor
Saarimaa, Tuukka
Keywords
hedonic pricing, lift installation, difference in differences, lift subsidy, Finland
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