Effects of crowding, density and deprivation on residential satisfaction

Abstract

This thesis assesses the impact of household crowding, population density and the proximity of rich and poor in the city on people’s satisfaction with their residence (which I term ‘residential satisfaction’). The relationships are examined at a fine geographic level accounting for a wide range of socioeconomic factors and by using appropriate spatial regression techniques. The thesis is also motivated by a range of theoretical, empirical and technical questions: Policy: Governments are trying to make economic development more sustainable. When it comes to the growth of cities the primary policy tool for increasing sustainability is residential intensification. However, the primary outcome of intensification is greater population density, higher rents (which leads to higher levels of crowding within dwellings) and, in many cases, the increased proximity of widely disparate income groups. It is possible therefore that in an attempt to become more sustainable, increasing intensification will lead to a reduction in the overall wellbeing of urban residents. Theory: Urban intensification can raise rents without raising (and possibly lowering) residential satisfaction. Therefore the economists conventional measure of value, price, may not be adequate to judge the welfare consequences of intensification. The relative merits of judging policy outcomes on the basis of market price and individual measures of satisfaction are unclear. Rent (land price) is a collectively (market) generated objective measure of value accorded a site, while residential satisfaction is a subjective measure of the qualitative value of that site to the individual. The problem is that when applied to any given residence the two measures of ‘value’ may be weakly correlated. They may even be negatively correlated – reflecting the strong preference of New Zealanders for low density living. This thesis therefore argues for the value of using both price and residential satisfaction measures in developing policy around residential intensification. I apply econometric methods to three rounds of the New Zealand General Social Survey, 2008, 2012, 2014 plus 2006 Census data covering the area administered by the Auckland Council and draw four main conclusions: Firstly, after taking people’s location choice into account, a higher level of population density in the resident’s own suburb lowers residential satisfaction. At the same time, residents are more sensitive to the perception of crowding [in the dwelling] than with objective measures of crowding. Secondly, a higher level of crowding in the person’s household than expected, which is estimated based on their background, decreases residential satisfaction. Thirdly, people respond to reference groups, which in the Auckland case are found to be those who live within a 15-minute walk of the resident. After taking into account the endogeneity of residential choice, people are more sensitive to their own household crowding levels compared to that of their neighbours. Fourthly, residents are sensitive to the relative quality of neighbouring areas. In residential satisfaction terms, residents of (relatively) rich areas are negatively affected by the lower affluence of neighbouring areas, but residents of poorer areas are positively affected by the superior amenities of higher income neighbours. Therefore, while one group is sensitive to ‘not-in-my-backyard’ (NIMBY) effects, the other sees value in being located near high value areas. In summary, this thesis demonstrates the worth of using residential satisfaction in urban economic studies. The results indicate that people apply expectations based on their social norms when evaluating their living environment. After taking these social norms into account, people value living in less crowded houses, in less dense suburbs and in proximity to affluent areas.