On the Economics of Health in Homes

with Erdal Aydin, Piet Eichholtz, and Juan Palacios, Working Paper (April 2018)

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The effects of outdoor climate and air pollution on health outcomes have been well documented, but in developed countries, individuals spend most of their time indoors, particularly in their own home. This paper investigates the relationship between home maintenance and occupant health, using a detailed, longitudinal dataset of some 25,000 German households. The analysis shows that individuals living in poorly maintained homes tend to report a higher number of health issues, after controlling for socio-economic status and health-affecting lifestyle choices. Those individuals also experience an 11-percent increase in their demand for healthcare, as reflected in the number of visits to the doctor. We document significant heterogeneity in the detrimental effect of poor housing quality on the demand for healthcare. For age groups over 64 years, occupants of homes in need of a major renovation visit the doctor about 30 percent more often as compared to those living in homes that are in good condition. We find that homeowners and tenants are about equally likely to escape a badly maintained home through moving, but that the former are much more likely to renovate their homes than the landlords of tenants, increasing tenants' exposure to adverse housing conditions.