The relevance of social interactions on housing satisfaction

For most individuals, housing is the largest consumption and investment item of their lifetime and, as a result, housing satisfaction is an important component of their quality of life. The purpose of this paper then is to investigate the determinants of individual housing satisfaction as a particular domain of satisfaction with life as a whole, examining the effects of individual and household attributes (predictive), housing characteristics (hedonic), and more importantly, of social interactions originated in one's residential neighbourhood. To do so, we model housing as a composite commodity that satisfies dwelling needs, as well as other intangibles such as familiar relationships and socio-status aspects. We use the Survey of Living Conditions and Poverty (Spain). Specifically, using a self-reported measure of housing satisfaction, we estimate ordered probit models searching for the empirical specification that provides the best fit accounting for divergences driven by aspirations defined in the own household (internal norm), and by social comparisons (peer-effect or external norm).