No abstract

A multilevel model of the housing market for San José Metropolitan Region (Costa Rica) was developed, including spatial effects. The model is used to explore two main questions: the extent to which contextual (of the surroundings) and compositional (of the property itself) effects explain variation of housing prices and how does the relation between price and key covariates change with the introduction of multilevel effects. Hierarchical relations (lower level units nested into higher level) were modeled by specifying multilevel models with random intercepts and a conditional autoregressive term to include spatial effects from neighboring units at the higher level (districts). The random intercepts and conditional autoregressive models presented the best fit to the data. Variation at the higher level accounted for 16% of variance in the random intercepts model and 28% in the conditional autoregressive model. The sign and magnitude of regression coefficients proved remarkably stable across model specifications. Travel time to the city center, which presented a non-linear relation to price, was found to be the most important determinant. Multilevel and conditional autoregressive models constituted important improvements in modeling housing price, despite most of the variation still occurring at the lower level, by improving the overall model fit. They were capable of representing the regional structure and of reducing sampling bias in the data. However, the conditional autoregressive specification only represented a limited advance over the random intercepts formulation.

Residential socio-economic segregation in Costa Rica had an overall decreasing trend between 1973 and 2011 because of a sustained reduction in the amount of lower income households. However, in 1986, the national housing program was reformed, including a ten-fold increase in housing supply (292 thousand subsidies allocated in 1987-2011, in a country with 1.36 million housing units). The pattern of these subsidies was hypothesized to increase residential segregation in Costa Rica. Segregation indices were estimated per municipality for lower and higher income groups. The impact of social housing subsidies on segregation levels was quantified using a fixed effects model with standard errors corrected for spatial dependence. Social housing supply was found to have historically reduced residential segregation; however, the 1986 reforms created a system that followed the patterns of real estate markets, in turn reducing much of the system’s mitigation effect on residential segregation.