Measuring the Effects of " Adults Only" Age Restrictions on Condominium Prices

Article excerpt

Abstract. Current U.S. housing policy prohibits discrimination in the sale or rental of housing or in the provision of brokerage services on the basis of race, color, religion, sex, national origin, disability, or familial status. Since 1988, an exception to this policy has permitted owners and operators of buildings and facilities that were intended to be operated as housing for older persons to discriminate against younger residents, including families with children and pregnant women, without violating the nation's fair housing laws. This exception was clarified by the Housing for Older Persons Act of 1995 which precisely defines the type of facility that qualifies as housing for older persons. The purpose of this study is to consider whether such restrictions have a measurable effect on housing prices. Based upon data from condominium transactions in southeast Florida, the results presented here suggest that age restrictions have a positive price effect, holding other determinants of condominium prices constant.

Introduction

Despite the public policy trend in the United States over the last several decades to ensure every American's right to equal treatment with respect to housing, one demographic group has managed to preserve its ability to segregate itself from other societal groups. Under current interpretation of the nation's fair housing laws, "older' Americans are well within their rights to group themselves together geographically and prohibit "younger" Americans from establishing a residence in their enclave. Specifically, residents of a qualified housing facility or community can adopt a policy that restricts occupancy to those 55 years and older to ensure that current residents are surrounded by other adults and not bothered by the sounds and sights of younger residents who might otherwise disturb a peaceful existence.

Because occupancy restrictions against younger residents could easily eliminate substantial numbers of potential residents in most housing markets, one might suspect that such a policy would imply reduced total demand (other things held constant) for the housing units and, therefore, reduced equilibrium prices of the units. If, however, such a policy results in a net increase in total demand (other things held constant) for the housing units in a given market from persons who place high value on living only among other older persons, occupancy restrictions against younger residents may in fact increase the equilibrium prices of the housing units. The question considered in this study is whether age restriction policies have an observable impact on housing prices in a given market. Understanding the price effects of age restrictions on housing prices is important for housing developers and current owners who are contemplating age restriction policies, as well as public policy makers who are struggling to comprehend housing issues facing older Americans.

To measure the effects of "adults only" restrictions on housing prices, we collect data relating to individual condominium unit transactions in Broward County (Fort Lauderdale), Florida, and specify a hedonic model for these transactions that permits testing for price effects associated with the age restriction policy. The results suggest that a statistically significant price premium is associated with policies restricting occupancy to "adults only," indicating that age restrictions are a value-enhancing amenity in this condominium market. The results are similar to those reported by Guntermann (1997) in his study of the impact of age restrictions in the mobile home market.

The first section of this study traces the legislative and administrative history of age restrictions in American housing policy. The second section develops a hedonic model for testing for price effects of age restrictions in condominium markets. The third section describes the data collected for this study and the results obtained from applying the model to the data. …