What Is a House? Exploring the Relationship Between Housing and Economic Development

Abstract

The debate on the hypothesis that massive housing construction is the starting point of economic development has been ongoing since the end of World War II. Proponents of this hypothesis believe that housing serves as an impetus for economic development, and there is practical evidence to support this view. Opponents, however, state that housing is not a cause but a consequence of development. This latter group, in line with mainstream economic models, considers housing as a private consumer good, such as automobile, clothing, food and furniture. While the supply of housing entails enormous economies of scale, the consumption gives rise to interdependence costs. To internalize these costs, economic goods associated with interdependence costs require group or political consideration. Thus, it becomes inappropriate to model a house as a consumer good. The purpose of this article is to show that physical structure alone does not constitute a house. Private and public goods, complementary to housing, which lead to scale economies and elimination of interdependence costs excluded from relevant housing models, produce inadequate definition of a house.