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Housing costs are the most significant costs for the average household budget and have significant implications for quality of life and standard of living. Most studies on determinants of housing costs have been on metropolitan ar- eas. Micropolitan areas were first classified in 2003 by the Office of Management and Budget and are defined as having at least one urban cluster with a population of at least 10,000 but less than 50,000. Micropolitan areas are therefore a new classification of urban areas and there have not been many studies on the cost of housing in micropolitan areas. This paper examines determinants of growth in housing costs in micropolitan areas. The purpose of this study is to bridge the information gap in the economic literature between metropolitan areas and micropolitan areas. This study is uses the Ordinary Least Squares (OLS) model. The OLS method squares the error term (the amount of variation in the data that is not explained by the regression), making bigger errors have more penalty in the estimation of the determinants of growth in housing costs, which results in overall more solid and more conservative estimates. A weighted average of growth in the median gross rent and the growth in median housing prices are used in this study to represent the growth in housing costs. This paper furthermore applies the results from the model on the growth of housing costs to the Pittsburg Micropolitan Area and attempts to identify policies which would help make local housing more affordable.

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