Investigating the implicit cost of smoking

A team of researchers have used Zoopla Property data from the UBDC data service to estimate the rent premium associated with smoking in the long-term rental market.

In this blog, Cigdem Gedikli (Swansea University, UK), Robert Hill (University of Graz, Austria), Oleksandr Talavera (University of Birmingham, UK) and Okan Yilmaz (Swansea University, UK) outline the findings from their paper on the hidden cost of smoking.

To estimate the rent premium associated with smoking in the long-term rental market, our team has used implicit content in advertisements regarding landlords’ attitudes towards smoking. Zoopla is one of the UK’s leading providers of historical property listing data, with more than 27 million residential property records in their archives. It contains more than 8 million properties advertised for sale and/or rent. In this paper, we employ the data for the properties advertised for rent between 2012 and 2018.

We used textual information available in the description section of the Zoopla property data to capture whether houses listed for rent include keywords or clauses such as “no smoking”, “smoking not allowed”, “smoking is not permitted”, and so on. Using this information, we investigated the extent to which these houses command different prices when compared with those that do not include clauses intended to exclude smokers.

We used various estimation methods - ranging from a standard hedonic pricing model to matching methods and more sophisticated machine-learning techniques. The results from these approaches consistently showed that houses where smoking is not restricted charge a rent premium. The extent of this premium is noteworthy. If we consider the results from the data matched by the coarsened exact matching method - where we match properties on their observed characteristics and the further characteristics (such as being furnished or refurbished) that we identified through textual data - there is a 6% rent premium related to smoking.

This implicit premium is meaningful. As the mean weekly rent is around £240 in our sample, this premium corresponds to an average of £14.40 per week. To put this number into context, the average number of cigarettes consumed by an adult smoker in England is 10 per day, and the average retail price of 20 filtered cigarettes is £11.45. This translates into an average of £40 weekly spending as a direct cost of smoking. Accordingly, the £14.40 rental premium, as a hidden indirect cost, paid by the average smoker increases the total cost of smoking by a third.

This is a significant additional financial cost, especially considering the increased poverty rates in smoking households in the UK after accounting for the money spent on tobacco.