Investigating the Factors Affecting House Rent among Different Income Groups in Rajshahi City: A Hedonic Pricing Approach

Housing is the basic and constitutional right of the people of Bangladesh. Due to the pressure of rapid urbanization, Bangladesh has been facing severe shortage of housing for households, especially in the urban areas. In addition, rapid migration in urban areas has also caused serious shortage of ready-made houses. Like other urban areas of Bangladesh, there is severe shortage of ready-made houses in Rajshahi city and therefore, a large part of urban residents has to depend on rented houses to live in. It is found from studying different literature that house rent varies across tenants with different income levels and the rent of houses is generally determined by structural, neighborhood and environmental attributes of the houses. Preferences of structural, environmental and neighborhood attributes also differ among households which is expressed by their paying patterns of rents. Thus, this study aims to identify the factors responsible for rent differentials between different income groups in the study area. For this purpose, primary data have been collected from residents (n = 210) living in various areas of Rajshahi city using random sampling method. The influence of structure, neighborhood, and environmental attributes on the rental value of houses in different income groups have been estimated by applying the hedonic pricing method. The total sample has been divided into two income groups at the median point and analyses are done in a disaggregated way. The estimation results show that the four factors- tenants’ income, house structure attributes, neighborhood attributes, and environmental attributes, all have significant impact on the amount of house rent in the study area. The segregated results show that in case of lower income groups the structural attributes affect house rent more prominently while the higher income groups are mostly attracted by the environmental and neighborhood attributes. Among structural attributes, the influence of the number of rooms in the house rent in case of lower income group is 63% larger than that of higher income group. Among neighborhood attributes, in case of higher income group, the impact of distance to work location on the house rent is 25% greater than that of the lower income group. Among Environmental attributes, the impact of open space distance on house rent in case of higher income group is 29.04% larger than that of lower income groups, and the influence of ventilation on house rent in case of higher income groups is 15% larger than that of lower income groups. Finally, this research proposes that government and non-government agency should take proper initiatives for environmentally friendly urbanization.