A Comparison of Consumer Expenditures by Housing Tenure

One of the most important decisions a consumer makes is whether to rent or own a home. Although many articles have been written about selection of tenure (e.g., Henderson and Ioannides 1983; Li 1977; Stevens 1979), none found have discussed how tenure, once chosen, is related to consumers' expenditures for items like food, apparel, transportation, and health and personal care. Dissimilarities in expenditure patterns by tenure are important both to consumers and consumer analysts. For example, before deciding to purchase a home, a renter presumably considers how long-run expenditure patterns will change after purchase. For the analyst understanding the relationship of housing tenure to expenditures provides new insight for consumer research. For example, the percentage of owner occupied housing units has grown considerably over the last several decades, from 44 percent in 1940 to 64 percent in 1990 (U.S. Census Bureau 1992, Table 1224). Undoubtedly, this percentage will continue to change. If expenditure patterns differ for homeowners and renters even when all other factors are held constant, then changing patterns in homeownership could explain changing patterns in expenditures that otherwise might not be explicable. This article explores the relationships of expenditures to housing tenure and discusses whether differences in expenditures are due to the fact that demographic characteristics differ across tenure or to some less quantifiable underlying differences in consumers across tenure. Several types of analysis are performed. First, expenditure levels and total expenditure shares are presented for two types of tenure: homeowners and renters. Next, multivariate regressions are performed to see what relationships demographic characteristics have to expenditures for the two types of tenure. Finally, income elasticities of expenditures are examined for differences across tenure. In each case substantial differences are found, indicating that tenure is an important factor to consider in studying a consumer's expenditures. Even if two consumers have otherwise identical characteristics, their expenditure patterns are predicted to differ for many items if one owns and the other rents. The paper is organized as follows: sample description; demographic characteristics and expenditure shares for the groups under study; regression techniques used; regression results including income elasticities; and conclusions. The data are from the interview component of the Bureau of Labor Statistics Consumer Expenditure Survey. They represent responses from consumer units(1) collected in the survey from the first quarter 1989 through fourth quarter 1990. DATA The Consumer Expenditure Interview Survey (CE) is the most comprehensive source of detailed information on family expenditures and income related to the socioeconomic and demographic characteristics of the U.S. population. The CE is conducted on a continual basis with rotating panels of approximately 5,000 families, who are interviewed for five consecutive quarters; one-fifth of the sample is new each quarter. The data are taken directly from the internal data bases at the Bureau of Labor Statistics. Although CE family-level data are published on tapes, these data are subject to restrictions (for confidentiality reasons) that do not apply to the internal data (Division of Consumer Expenditure Surveys 1993, 89). For example, the variable describing region of residence for rural families is blank on the tape, but it is available internally. Definitions Homeowners are defined as all families living in their owned or mortgaged homes, excluding those families living in condominiums or cooperatives. Renters are defined as all families living in dwellings for which rent is paid, excluding student housing. Condominium and cooperative owners are not examined for several reasons. First, they are a small portion (three percent) of the population and appear to be of declining significance. …