Tenant satisfaction in housing real estate – an empirical analysis

ERES 2009 – Doctoral Session 2.4Jens Pozimski24.07.2009

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Table of Contents

Introduction

Data Description

Database of a listed housing companyDatabase of a listed housing company

Data from a questionnaireData from a questionnaire

Research Design

Tenant satisfaction in housing real estate– an empirical analysis

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Introduction

Former subject: determinantes of residence time

The multiplicative inverse of residence time is fluctuation

Results of fluctuation for the owner are direct costs: administration costs, (temporary) loss of rentappox. 2.000 – 2.500 Euro / dwelling indirect costs: refurbishment

appox. 15.000 – 20.000 Euro / dwelling

Purpose of business: maximise profits by optimising revenues and costs

Which factors cause fluctuation (costs)?

To what extent rent increase will affect fluctuation (revenues)?

Tenant satisfaction in housing real estate– an empirical analysis

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Introduction

New subject: tenant satisfaction (satisfaction reduces fluctuation)

What are the main drivers to enhance tenant satisfactionRental feeOperating costsQuality of dwellingRental space

Tenant satisfaction in housing real estate– an empirical analysis

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Data

Database of a listed housing company with a stock of 35.000 dwellings in the southern part of Germany

• Start and end of the term of lease -> residence time

• Rental fee

• Local index rent

• (non-recoverable) operating costs

• Quality of flats

• Location

• Living space

• Number of rooms

Tenant satisfaction in housing real estate– an empirical analysis

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Data

Data from a questionnaire. The Questionnaire includes data from the database

Rental fee

Local rent level (index rent)

Operating costs

Quality of the dwelling (cluster)

Quality of the environment (cluster)

Living space and number of rooms

Tenant satisfaction in housing real estate– an empirical analysis

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Data

Data from a questionnaire. Questions:

Level of satisfaction (1-6) – dependent variable

What is the fair rental fee for this flat?

How much are you willing to pay?

Income of household

What could be improved?

Did the level of the comparable local rental fee surprise you?

Tenant satisfaction in housing real estate– an empirical analysis

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Data

Data from a questionnaire. Does Satisfaction has an influence on residence time/fluctuation? Questions about changing the dwelling:

Low satisfaction

Rental fee

Size

Employment

Personal or family reasons

Other reasons

Tenant satisfaction in housing real estate– an empirical analysis

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Research Design

Simple Regression Model

Dependent variable (level of satisfaction) = α+β(1)*(rental fee)+β(2)*(affordability)+β(n)*(…)+E

Building of clusters to reduce biasregarding the quality of dwellingsregarding the locationregarding the size of the dwelling

Different specifications rental fee (absolute, relative to average rent of appartment complex, relative to local index rent) operating costs (absolute, relative to rental fee)

Tenant satisfaction in housing real estate– an empirical analysis

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Research Design

Results of the regression

• Significant variables -> find a breakeven-equation to optimise the maximum profit using the obtained parameters from the regression

max (P) -> R – C

P = profit

R = revenue (from rental income)

C = Costs (operating costs, fluctuation costs)

Tenant satisfaction in housing real estate– an empirical analysis