Reinvestment Behaviour and Policies in Housing

Abstract

Reinvestment decisions in housing are made by independent households in the free market, rather than by some authority. Although a micro level activity, households’ decisions in reinvestments often have broader implications at the macro level. Some of these implications can be observed directly in the built environment, whereas others are to be traced in the overall economy. Developing an understanding of households’ reinvestment behaviour and providing information on this issue could contribute to the monitoring of the economic system, as well as to urban decision-makers and planners in designing finer policies and tools of intervention in relation to problems of the housing stock and neighbourhood environments. The study aims to identify problems in reinvestment issues, factors in household reinvestment decisions, adjustment strategies of households, scale and types of reinvestment work, and motivation underlying the investments so as to explore macro implications of reinvestment behaviour. Current levels of investments in urban areas have increased to such significant magnitudes in Turkey that its implications for the overall economy have to be taken into account. Despite four decades of research and practice history in the world, reinvestment issues have been ignored in Turkey. The findings of this study reveal that although substantial capital and resources are engaged in reinvestment activities in Turkey, there are households who are unable or unwilling to reinvest to their dwellings, or conversely there are dwellings that are unlikely to receive reinvestments. These are the lowest income households, the rental stock, or dwellings located in the neighbourhoods of poor environmental quality, and flats in apartment blocks where common areas are not maintained. With another point of view, reinvestment decisions have implications in the depreciation of the housing stock. The findings display that in the Turkish case reinvestments in existing housing stock are significant components of housing investments, households’ reinvestment expenditures have implications in the construction sector and thereby in the overall economy, and households’ reinvestments help to adjust housing consumption with regard to the current needs and trends, and act as supply adjustment mechanisms in existing housing stock and neighbourhoods. The findings indicate a possible set of policy issues in the more efficient operation of the housing markets.