Housing is also behaviour

Could behavioural interventions contribute to better social outcomes in the housing market? Despite this being an under explored area of research, behavioural science can play a part in this discussion. 

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Housing biases and Government interventions

In her paper ‘Between Carrots And Sticks, From Intentions To Actions: Behavioural Interventions For Housing Decisions’, Helen X. H. Bao argues that while government interventions in the form of carrots (incentives) and sticks (regulations) may or may not produce socially desirable outcomes, behavioural interventions could empower people to make better choices for themselves and society. 

Bao found the top five biases in housing studies are;

• Anchoring (picking an initial price – or anchor – which influences subsequent decisions)
• Reference point dependence and loss aversion (where the outcome – gains or losses – are measured from a starting reference point and losses are actively avoided)
• Disposition effect (the tendency to sell too early and hold on to losses too long)
• Framing (the same information presented in different ways can strongly influence how people act in response to that information), and
• Endowment effect (people often value – or endow – what they own as being worth more than the market does)
• Prospect Theory (people tend to be risk-averse when the stakes are high, not only minimising losses but underestimating unlikely events, like house values going down)

We have certain cognitive traits which prove challenging when it comes to the housing market, such as hyperbolic discounting (focussing on short term gains) and inertia (resisting change). Good intentions don’t always translate into actions; we want clean air and fast commutes, but resist giving up the main barrier to both – cars. This is the Intention-Action Gap. For this reason, Bao argues, the outcome variables for any experiments in the housing sector should be people’s actions, not intentions. 

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How can science help?

Behavioural insights can inform the way information is framed. Messages can be framed differently to change outcomes. As Bao points out, a study by Doberstein, Hickey and Li (2016) in Canada showed that messages regarding the public benefits of increased density - better infrastructure, more interesting parks and restaurants, etc – reduced NIMBYism by four times the control message. Instead of ‘unwanted development’ or ‘congestion’, messages might talk about the activation of a precinct, attracting new schools, shops and services.

Providing information at decision points when long-ingrained habits are vulnerable to change, such as at the time of a residential move, can be influential on choices. Tools such as interactive visualization of commute options can be used as a behavioural intervention to increase commuters’ willingness to travel more sustainably. 

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Home truths

Bao’s work, both in her paper and her 2020 book Behavioural Science and Housing Decision Making demonstrates the value of the behavioural science toolbox in contributing to solving major challenges in housing. She highlights the growing body of literature that demonstrates that when it comes to decisions about housing – much like decisions about many things – people’s behaviour is not always rationally aligned to market forces. This is where behavioural science can support policymakers and decision-makers to narrow the intention-action gap using cost-effective tools.

Although more research is needed in this area, Bao believes behavioural science has a role to play in solving the housing crisis;

“In conclusion, the growing application of behavioural insights in the housing market holds great promise for shaping more informed, efficient, and socially responsible decision-making processes. The integration of behavioural interventions in housing policies can pave the way for positive transformations in this crucial sector.”

- ‘Between Carrots And Sticks, From Intentions To Actions: Behavioural Interventions For Housing Decisions’, Helen X. H. Bao 

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