The Impact of Housing Conditions on Health Outcomes

Date                        01-05-2020

Publication              Real Estate Economics

 

Expertise                We investigate the relationship between housing conditions and health outcomes using a dataset that tracks 25,000 German households over 25 years. We document that individuals exposed to poor housing conditions report worse mental and physical health, and experience an 11 percent increase in doctor visits, increasing to 20 percent for age groups over 64. The analysis controls for individual, dwelling and temporal fixed effects, and is robust to changes in socio-economic status, lifestyle choices, and neighborhood conditions. As a robustness check, we use home renovations as major a trigger of changes in housing conditions. Restricting the analysis to tenants, whose renovations are paid by landlords, we document that home renovation significantly reduces doctor visits, corroborating the findings on home conditions and health outcomes.

Author(s) 

 

Juan Palacios

Postdoctoral Researcher  - MIT

Erdal Aydin

Assistant Professor of Economics - Sabanci University

Nils Kok

Associate Professor of Finance & Real Estate

Piet Eichholtz

Professor of Real Estate Finance           

Paper

Related Read          Stay Home, Stay Healthy? That Depends on the Home

Related Webpage   Maastricht center for real estate

Increasing welfare and longevity, and the corresponding rise in the demand for health services, are confronting modern society with rapidly rising healthcare costs. Understanding the causes of health deprivation, and providing solutions towards prevention, present an increasingly critical challenge for academia, private market participants, and policymakers. 
Housing and the built environment play a major role in shaping human health. The relationship between outdoor environmental issues and human health has been well established in the literature. However, indoor environmental conditions are not merely a by-product of outdoor environmental conditions.
We aim to estimate the impact of housing conditions on health outcomes in a setting representative of dwellings in modern societies having a higher-quality housing stock.
Addressing this knowledge lacuna is important, given that 90% percent of an individual's time is typically spent indoors. 
The starting point is household panel datasets and transparent statistical models that can complement evidence from the experiment-based medical literature. We exploit the German Socio-Economic Panel (GSOEP) from 1984 - the longest individual-level dataset that provides information on both health and housing conditions.
Each participant is interviewed, individually, and asked to evaluate the condition of their dwelling, as well as to complete an extensive questionnaire on subjective health status and on their demand for healthcare, objectively measured by the number of visits to a doctor and the days of sick leave. 
Individual and dwelling-fixed effects -  exploiting the changes in health outcomes associated with within-individual variation in housing conditions over long periods of time.
Individual-dwelling fixed effects - exploiting variations in individuals' housing conditions over time, avoiding potential confounding factors associated with moving to a new home.
Through the empirical analysis, we find the causality from housing conditions on health outcomes is substantial, across income groups, and regardless of common lifestyle choices.
Individuals exposed to poor housing conditions report worse mental and physical health and experience an 11% increase in demand for healthcare, reflected in doctor visits. The results are corroborated using an event study around the occurrence of (exogenous) home renovations. 
The effects of poor housing conditions on medical service consumption increase with age, increasing to 20% for age groups over 64, mainly driven by a deterioration of mental health. These effects are stronger for dwellings that are in need of a major renovation rather than a partial renovation.
 
We observe that individuals living in a poorly maintained home have a higher propensity to move, with remarkably similar effects for homeowners versus tenants. For investigating renovations, owner-occupiers living in homes that need a renovation show a likelihood of about 23% to renovate, while the likelihood of that in rental homes is less than 5%, prolonging tenants' exposure to unhealthy housing conditions.
Housing conditions & Health Outcomes

The average level of health measures for different housing conditions

In a 95% confidence interval. Current health ranges from 1 (very good health) to 5 (bad health). Mental and physical scales range from 0 to 100

Housing conditions & Health Over Lifetime

Housing conditions and occupant mental and physical health over lifetime

The figure shows the standardized conditional mean of physical and mental scales for the sample of individuals that report living in a house in good conditions and those report living in a house in need of repairs, over the lifetime of an individual. The conditional mean is constructed from the regression controlling for gender, income, education, and marital status. Mental and physical scales range from 0 to 100

Further, based on the GSOEP survey, 29% of German homes need renovation. According to our findings, the renovation of those homes would reduce visits to the doctor by 11%. It would cost EUR 444 billion, but, it can lead to annual savings on the healthcare costs of EUR 594 billion in the present value.

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