1# RECORD 4a0a05883004ee538ec38fa812f7d2e81fdd4eb92# TITLE: Do Foreigners Pay Higher Rents for the Same Quality of Housing in Geneva and Zurich?3# YEAR: 2008.0 VENUE: nan DOI: 10.1007/bf033992724# AUTHORS: A. Baranzini; C. Schaerer; J. Ramirez; P. Thalmann5# PAGES: 28 CANDIDATE TABLE PAGES (1-based): [18, 19, 20, 23]6# ABSTRACT: SummaryThe Geneva and Zurich housing markets are characterised by high proportions of foreigners and a large share of rental housing. This provides ideal conditions for testing whether foreigners pay more for the same quality of housing than Swiss households and whether flats in neighbourhoods with higher proportions of foreigners rent at a discount. Hedonic price equations using a rich dataset on dwellings and their occupants yield evidence of such discrimination and prejudice. They also suggest more complex relationships between tenant nationality, housing and neighbourhood quality, and rents.789===== PAGE 1 (score 8, numeric-paren 0, table-words 0, var-words 8) =====1011© Swiss Journal of Economics and Statistics 122008, Vol. 144 (4) 703–73013a 14Geneva School of Business Administration (HEG-Ge), Center for Applied Research in Man-15agement (CRAG), University of Applied Sciences of Western Switzerland (HES-SO), 7 route 16de Drize, CH-1227 Carouge, Geneva, Switzerland. Andrea.Baranzini@hesge.ch; Jose.Rami-17rez@hesge.ch; Caroline.Schaerer@hesge.ch18b 19Swiss Institute of Technology Lausanne (EPFL), Research Group on the Economics and Man-20agement of the Environment (REME), Station 16, 1015 Lausanne, Switzerland. Philippe.Thal-21mann@epfl.ch22 23Acknowledgements:We are grateful for financial support from the Swiss National Science Foun-24dation, National Research Programme NRP 54 “Sustainable Development of the Built Envi-25ronment”. We thank the Swiss Federal Statistical Office for providing the data of the 2000 26Swiss Population Census; the Geneva and Zurich Cantonal Offices for protection against noise 27for the noise data; the Information System of the Geneva Territory (Système d’Information 28du Territoire Genevois, SITG) and the Zurich GIS-centre of the office of land use regulation 29and measurement (GIS-Zentrum des Amtes für Raumordung und Vermessung des Kantons 30Zürich, ARV) for providing the GIS data. A special thank to Eva Robinson for excellent assist-31ance support in calculating GIS variables. None of these institutions or persons is responsible 32for or endorses in any way the contents of this paper.33Do Foreigners Pay Higher Rents for the Same Quality 34of Housing in Geneva and Zurich?35Andrea Baranzinia, Caroline Schaerera, José V. Ramireza 36and Philippe Thalmannb37JEL-Classification: R31, R52, D6338Keywords: housing market, rental market, hedonic model, discrimination, prejudice391. Introduction40Residential segregation and discrimination have been extensively studied in the 41United States, which exhibits large proportions of ethnic minorities, often very 42concentrated in well-defined areas. In Western Europe, the problem of ghettos 43in which more than 70 per cent of the area’s inhabitants are of a minority group 44is scarcer. In fact, Western European countries often comprise a mix of different 45minority populations (see Huttman, 1991, and Harrison, Law and Phillips, 462005). Furthermore, minorities are more identified by geographic origin than by 47ethnicity. Indeed, international migration is high and integration and assimila-48tion may be less rapid than in the USA.495051===== PAGE 18 (score 143, numeric-paren 118, table-words 3, var-words 7) =====5253720 54Baranzini / Schaerer / Ramirez / Thalmann55Table 2: Results Model 1, Model 2 and Model 2-fix 56Geneva57Zurich58Dependent variable: ln(net monthly rent)59Model 160Model 261Model 2-fix62Model 163Model 264Model 2-fix65Structural characteristics66Built between 1946 and 196067−0.0775***68(0.0041)69−0.0743***70(0.0043)71−0.0681***72(0.0043)730.0075*74(0.0042)750.0074*76(0.0042)770.0089**78(0.0043)79Built between 1961 and 197080−0.0651***81(0.0042)82−0.0576***83(0.0043)84−0.0405***85(0.0043)860.0538***87(0.0046)880.0535***89(0.0046)900.0579***91(0.0047)92Built between 1971 and 1980930.0791***94(0.0047)950.0820***96(0.0044)970.0876***98(0.0045)990.0692***100(0.0053)1010.0693***102(0.0053)1030.0766***104(0.0054)105Built between 1981 and 19901060.2113***107(0.0056)1080.2064***109(0.0051)1100.2070***111(0.0052)1120.3006***113(0.0057)1140.2994***115(0.0058)1160.3011***117(0.0058)118Built between 1991 and 20001190.0620***120(0.0057)1210.0618***122(0.0058)1230.0723***124(0.0059)1250.1975***126(0.0061)1270.1968***128(0.0061)1290.2059***130(0.0063)131Building was renovated before 19901320.0234***133(0.0059)1340.0179***135(0.0062)1360.0169***137(0.0062)1380.0096**139(0.0042)1400.0095**141(0.0042)1420.0084**143(0.0041)144Floor level1450.0188***146(0.0006)1470.0194***148(0.0007)1490.0196***150(0.0006)1510.0108***152(0.0008)1530.0111***154(0.0008)1550.0113***156(0.0008)157Number of floors in the building158−0.0058***159(0.0007)160−0.0068***161(0.0007)162−0.0065***163(0.0007)1640.0005165(0.0006)1660.0004167(0.0006)1680.0019***169(0.0006)170Number of rooms1710.2703***172(0.0014)1730.2677***174(0.0015)1750.2639***176(0.0016)1770.2750***178(0.0016)1790.2745***180(0.0016)1810.2728***182(0.0016)183Surface per room [m2]1840.0154***185(0.0002)1860.0151***187(0.0003)1880.0143***189(0.0003)1900.0133***191(0.0003)1920.0132***193(0.0003)1940.0129***195(0.0003)196197198===== PAGE 19 (score 143, numeric-paren 118, table-words 3, var-words 7) =====199200Do Foreigners Pay Higher Rents for the Same Quality of Housing? 201721202Geneva203Zurich204Dependent variable: ln(net monthly rent)205Model 1206Model 2207Model 2-fix208Model 1209Model 2210Model 2-fix211Surface per inhabitant [m2]2120.0003***213(0.0001)2140.0003***215(0.0001)2160.0002***217(0.0001)2180.0005***219(0.0001)2200.0006***221(0.0001)2220.0006***223(0.0001)224Kitchenette225−0.0755***226(0.0072)227−0.0792***228(0.0071)229−0.0791***230(0.0071)231−0.0761***232(0.0076)233−0.0780***234(0.0075)235−0.0872***236(0.0076)237Attic2380.0235***239(0.0073)2400.0228***241(0.0079)2420.0252***243(0.0077)2440.0316***245(0.0061)2460.0313***247(0.0061)2480.0345***249(0.0061)250Gas heating2510.0169***252(0.0035)2530.0246***254(0.0037)2550.0278***256(0.0036)2570.0485***258(0.0035)2590.0486***260(0.0035)2610.0513***262(0.0035)263Privately owned building2640.0627***2650.0659***2660.0588***2670.1182***2680.1182***2690.1169***270(0.0029)271(0.0029)272(0.0029)273(0.0032)274(0.0032)275(0.0032)276Publicly owned building277−0.1170***278(0.0057)279−0.1277***280(0.0060)281−0.1160***282(0.0062)283−0.2517***284(0.0058)285−0.2507***286(0.0058)287−0.2549***288(0.0058)289Same tenant for at least 5 years290−0.1615***291(0.0027)292−0.1613***293(0.0027)294−0.1609***295(0.0026)296−0.1287***297(0.0029)298−0.1273***299(0.0029)300−0.1270***301(0.0029)302Location characteristics303Distance to nearest transportation stop [km]304−0.1021***305(0.0226)306−0.1261***307(0.0218)308−0.1081***309(0.0223)310−0.1521***311(0.0223)312−0.1523***313(0.0223)314−0.0979***315(0.0219)316Distance to nearest park [km]3170.1000***318(0.0148)3190.1266***320(0.0143)3210.0064322(0.0156)3230.0465***324(0.0160)3250.0449***326(0.0160)3270.0026328(0.0162)329Distance to city centre [km]330−0.0117***331(0.0013)332−0.0106***333(0.0012)3340.0218***335(0.0036)336−0.0392***337(0.0012)338−0.0390***339(0.0012)340−0.0416***341(0.0018)342Table 2 (continued)343344345===== PAGE 20 (score 76, numeric-paren 56, table-words 4, var-words 6) =====346347722 348Baranzini / Schaerer / Ramirez / Thalmann349Geneva350Zurich351Dependent variable: ln(net monthly rent)352Model 1353Model 2354Model 2-fix355Model 1356Model 2357Model 2-fix358% of parks in the district (x100)3590.3660***360(0.0306)3610.3778***362(0.0303)3630.3262***364(0.0258)3650.3259***366(0.0259)367% of trees in the district (x100)368−0.1668***369(0.0217)370−0.2104***371(0.0212)372−0.1134***373(0.0116)374−0.1132***375(0.0117)376Population density [per ha] (x100)377−0.0258***378(0.0013)379−0.0205***380(0.0013)381−0.0182***382(0.0014)383−0.0298***384(0.0021)385−0.0295***386(0.0022)387−0.0230***388(0.0022)389Environmental characteristics390Daytime noise [dB(A)] (x100)391−0.2828***392(0.0318)393−0.1854***394(0.0318)395−0.2784***396(0.0332)397−0.3599***398(0.0413)399−0.3591***400(0.0422)401−0.4062***402(0.0436)403Household head characteristics404Foreigner4050.0227***406(0.0028)4070.0217***408(0.0028)4090.0260***410(0.0033)4110.0261***412(0.0033)413Neighbourhood composition414% of foreigners [per ha] (x100)415−0.2222***416(0.0118)417−0.0899***418(0.0134)419−0.0197*420(0.0107)4210.0826***422(0.0118)423N424421624254216242642162427264894282648942926489430R24310.62854320.63184330.64174340.66894350.66964360.6769437Notes: *** significant at the 0.01 level; ** significant at the 0.05 level; * significant at the 0.10 level. The reference period of construction is before 4381946 and the reference type of owner is institutional.439Table 2 (continued)440441442===== PAGE 21 (score 11, numeric-paren 0, table-words 1, var-words 9) =====443444Do Foreigners Pay Higher Rents for the Same Quality of Housing? 445723446If the same household has been living in the dwelling for the past five years at 447least, the 2000 rent is about 18 per cent lower in Geneva and about 14 per cent 448lower in Zurich compared to a more recent lease. This confirms the suspicion 449that landlords generally seize the opportunity to raise the rent at changes in ten-450ancy (see Thalmann, 1987). Concerning the environmental variables, an addi-451tional decibel of road traffic noise during the day decreases the rent by about 0.3 452per cent on average in Geneva and 0.4 percent in Zurich. Proximity to the city 453centre and public transport stops raises rents while proximity to parks lowers 454them. These results are comparable to the findings from other hedonic studies 455using alternative databases for the Geneva (see e.g. Baranzini and Ramirez, 4562005; Baranzini and Schaerer, 2007) and Zurich markets (see e.g. Banfi, 457Filippini and Horehajova, 2008; Schaerer, Baranzini, Ramirez and Thal-458mann, 2007).459We now turn to the variables related to discrimination and prejudice. In both 460Geneva and Zurich, the coefficients associated with the nationality of the indi-461vidual are statistically significant and positive, which hints at discrimination 462since this implies that for a dwelling with the same characteristics a foreigner pays 4632.3 per cent more in Geneva and 2.6 per cent more in Zurich than a Swiss. The 464statistically significant and negative coefficients associated with the proportion 465of foreigners in Model 2 suggest prejudice in Geneva and Zurich, since tenants 466need to be compensated for living in a neighbourhood with a higher share of for-467eigners. As already discussed, this finding has however to be tested further, since 468the proportion of foreigners could be correlated with other neighbourhood char-469acteristics (cf. Harris, 1999; Bayer, Ferreira and McMillan, 2007; Bayer 470and MacMillan, 2008). Indeed, by introducing neighbourhood fixed effects 471in Model 2-fix, we observe that the coefficients decrease quite considerably in 472absolute value, from –0.22 to –0.09 in Geneva. This implies that prejudice is 473over-estimated in Model 2, because part of the neighbourhood unobserved char-474acteristics are correlated with the share of foreigners. This also means that on 475average the unobserved quality of neighbourhoods populated by higher shares of 476foreigners is lower than that of neighbourhoods inhabited by a greater proportion 477of Swiss (which need not imply that overall quality is lower, i.e. including the 478observed qualities of quietness and accessibility). For Zurich, the coefficient in 479Model 2-fix becomes even positive, implying that there is no prejudice, but that 480foreigners are again living in neighbourhoods of lower unobserved quality.481These results should be refined further, since the foreign population in Swit-482zerland is highly heterogeneous in terms of country of origin, education level 483and type of working permit. Therefore we re-estimate Models 2 and 2-fix by 484differentiating foreigners between those coming from OECD and non-OECD 485486487===== PAGE 23 (score 58, numeric-paren 40, table-words 5, var-words 4) =====488489Do Foreigners Pay Higher Rents for the Same Quality of Housing? 4907254915. Conclusions492We found evidence of segregation, prejudice and discrimination against foreign-493ers, particularly the less educated ones, in the two largest rental markets of Swit-494zerland, those of Zurich and Geneva. However, the magnitude of these biases is 495not very large, except for low education foreigners who pay between 5 and 7 per 496cent more on average for the same dwelling than low education Swiss. Without 497distinguishing by education level, the penalty imposed on foreigners is about 2 498per cent. That may seem little considering anecdotal evidence of relatively high 499rents charged for lousy housing to recent low-income immigrants or, in a differ-500ent category, of astronomical rents paid by highly qualified foreign employees of 501international firms. Our results do not contradict that anecdotal evidence but 502they remind us that the largest share of foreigners have been living in Switzerland 503Table 3: Results Model 3 and Model 3-fix504Geneva505Zurich506Dependent variable: ln(net monthly rent)507Model 3508Model 3-fix509Model 3510Model 3-fix511Traditional dwelling characteristics512(same as in Table 2)513(…)514(…)515(…)516(…)517Household head characteristics518Low education foreigner5190.0530***520(0.0047)5210.0509***522(0.0047)5230.0677***524(0.0057)5250.0659***526(0.0057)527High education foreigner5280.0934***529(0.0046)5300.0909***531(0.0046)5320.11096***533(0.0051)5340.1092***535(0.0050)536High education Swiss5370.0720***538(0.0040)5390.0690***540(0.0039)5410.09211***542(0.0042)5430.0887***544(0.0041)545Neighbourhood composition [per ha]546% of low education foreigners (x100)547−0.3930***548(0.0139)549−0.2980***550(0.0157)551−0.3219***552(0.0143)553−0.2534***554(0.0159)555% of high education foreigners (x100)5560.4966***557(0.0241)5580.4907***559(0.0245)5600.9178***561(0.0258)5620.9370***563(0.0263)564N56542162566421625672648956826489569R25700.64475710.64955720.69605730.6998574Notes: *** significant at the 0.01 level; ** significant at the 0.05 level; * significant at the 0.10 level. 575The reference for the household head is a Swiss with low education level.576577578===== PAGE 24 (score 7, numeric-paren 0, table-words 0, var-words 7) =====579580726 581Baranzini / Schaerer / Ramirez / Thalmann582for many years and are well integrated. Remember also that our discrimination 583indicator is quality adjusted, i.e. foreign specialists can still pay a lot for hous-584ing, but they do not necessarily pay significantly more than Swiss specialists for 585the same type of flats.586Of course, reality is more complex than what could be captured by simple pro-587portions of foreigners per hectare or a few coefficients on nationality dummies 588in hedonic price regressions. This is a first step to a more thorough analysis that 589is made possible by the growing wealth of data that we were able to collect. In 590particular, since our results show that foreigners with low education tend to live 591in neighbourhoods of relatively worse unobserved quality both in Geneva and 592Zurich, in a forthcoming companion paper we are more precisely characterising 593the differentials in the living conditions between socio-economic groups. Indeed, 594even if our results show no strong price discrimination against foreigners, it would 595still seem unfair if foreign households occupied systematically dwellings of lower 596quality in less attractive neighbourhoods or if they lived in more crowded situa-597tions and had to spend a higher share of their income for housing (e.g. Thalmann, 5982003). This will also allow for a broader picture about environmental justice. But 599more fundamentally, it would be relevant to develop a structural model taking into 600account the possibility of a market segmentation based on environmental quality 601and to test whether or not foreigners – particularly the less educated ones – have 602a higher probability to live in “low” quality neighbourhoods.603Our results shed light on a few facets of segregation, prejudice and discrimi-604nation. In addition, they show that household characteristics have their place in 605a hedonic price equation, but that the coefficients estimated for the traditional 606dwelling and neighbourhood characteristics are not significantly biased if they 607are left out.608References609Arend, M. (1991), “Housing Segregation in Switzerland”, in E. D. Huttman 610(ed.), Urban Housing Segregation of Minorities in Western Europe and the United 611States, Duke University Press, Durham and London.612Arend, M., A. Kellerhals Spitz and T. Mächler (1990), «Groupes défavori-613sés sur le marché du logement: Problèmes et mesures», Bulletin du logement 61445, Office fédéral du logement, Bern, Switzerland.615Bajari, P., and M. E. Kahn (2005), “Estimating Housing Demand with an 616Application to Explaining Racial Segregation in Cities”, Journal of Business 617and Economic Statistics, 23(1), pp. 20–33.618