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Measuring Poverty: A New Approach
Area or Population Size
Index for Renters
Index for Owners
Areas of 500,000-1,200,000
Areas of 100,000-500,000
Areas under 100,000
Low index value
Median index value
High index value
SOURCE: Kokoski, Cardiff, and Moulton (1992: Table 2.4).
NOTE: Areas are ordered within region by population size as of the 1990 census; rankings are assigned to the combined index values from 1 (highest cost) to 44 (lowest cost).
equations included some 33 attributes of housing units and neighborhoods.) They created bilateral interarea price indexes from the resulting antilogs of the estimated coefficients on the area dummy variables, and then created "multilateral" indexes from the bilateral indexes. The authors claim that the resulting multilateral indexes are independent of the choice of reference area and, hence, that the rankings for areas are stable.
The results obtained by Kokoski, Cardiff, and Moulton (1992) for July 1988-June 1989 tend to accord with common expectations about the location and magnitudes of high- and low-cost areas; see Table 3-5 . The major cities in the Northeast (Boston and New York City) and the West (Los Angeles, San Francisco, and San Diego) have the highest shelter costs, with index values between 1.46 and 1.83. Washington, D.C., Philadelphia, and Chicago have mid-range index values, while other major cities in the Midwest (e.g., St. Louis, Cleveland) and the South (e.g., Houston and Dallas) have substantially lower shelter costs, with index values between 0.69 and 0.84. Small urban areas generally have lower shelter costs than larger metropolitan areas in the same region. Indexes for rent and owners' equivalent rent tend to be highly correlated. In areas in which rent control is important (e.g., New York, Los Angeles, and San Francisco), the index for owners' equivalent rent is substantially higher than the rent index.
What can one conclude from the work to date to develop interarea housing cost indexes? Clearly, there are no easy answers to the question of how to develop a reliable index. Not only does the use of different methods yield