Our first task is to define subjective well-being. Subjective well-being has both an evaluative (cognitive/judgemental) component, and an experiential (emotional/affective) component (Pavot and Diener 1993). An individual eating a chocolate bar may be happy but dissatisfied with life, while a husband caring for his wife may be unhappy but satisfied with life. When assessed, these components are at least moderately correlated (Pavot and Diener 1993). In our analysis, we use indicators for both components and, in the absence of any literature to suggest otherwise, assume both components move together.

Pathways from Size of Living Space to Subjective Well-Being

Once there is sufficient space so as not to directly jeopardise physical health, this paper theorises two pathways through which size of living space is positively related to subjective well-being; through facilitating activities and values, and through status.

Pathway 1: Facilitating Activities and Values

An increase in living space (ceteris paribus) represents an increase in liberty. In the UK, for example, having friends round, sitting in peace and quiet and eating as a family are all activities limited by lack of space (Robert-Hughes 2011). By facilitating these activities, one would expect more space to lead to higher well-being. However, in a wider universal context, more space could be potentially damaging to well-being. Take the case of the Ghates in V.S. Naipaul’s portrait of India;

“Mr Ghate was a high senior official. He had grown up in the mill area, in one room in a chattel, though it was open to him, as a man of position, to live in better accommodation in a better area. He had tried to do that some years before, but it had ended badly. His wife had suffered in the comparative seclusion and spaciousness of the self contained apartment they had moved to. This was more than moodiness, she had become seriously disturbed. Mr Ghate had moved back to a chattel, to the two rooms he had now, back to the sense of a surrounding crowd and the sounds of life all around him, and he was happy again” (p. 60)

In this case, the increased space (and new surroundings) added options for the Ghates in terms of facilitating more activities but took away the option of experiencing a vibrant homelife. In most cases, moving to larger accommodation is likely to involve a similar trade-off. Nonetheless, given that shortage of space is the subject of so many complaints in the UK (Robert-Hughes 2011), we would expect more space to lead to higher subjective well-being but with diminishing marginal effect. In other words, an increase from 1 room per person to 2 rooms per person is likely to facilitate more activities and values than an increase from 2 rooms per person to 3 rooms per person.

Pathway 2: Status

“A house may be large or small; as long as the neighbouring houses are likewise small, it satisfies all social requirements for a residence. But let there arise next to the little house a palace, and the little house shrinks to a hut” (Marx and Engels 1965)

The second pathway through which size of living space could influence subjective well-being is status. There is strong evidence of a causal relationship between status and subjective well-being. For example, Luttmer (2004) found individual life satisfaction to be negatively related to neighbours’ income. See also Clark (2003) and Ferrer-i-Carbonell (2005). As Hirsch (2005) and Amartya Sen (1983) have pointed out, being concerned about status is rational as having high relative standing is a factor in the realization of numerous legitimate human objectives. One determinant of status is relative wealth. Relative wealth signifies one’s ability (Frank 2007) and power over others (Csikszentmihalyi and Rochberg-Halton 1981). By engaging in conspicuous consumption (Veblen 1899) one can signal their wealth to others. A house is the largest and most expensive physical object most individuals consume, and size is one of the main determinants of house value. The size of one’s house is therefore a visible indicator of wealth. However, because status is determined by relative wealth, what matters is not house size per se but relative house size. Frank (2007) found that most people state a preference for having a 3000 square foot house in a world where everyone else has a 2000 sq ft house, as opposed to having a 4000 sq ft house in a world where everyone else has a 6000 sq ft house. House size is therefore likely to be a positional good (Hirsch 2005; Frank 2007), whose utility value depends strongly on the consumption of others. In short, the relative size of one’s house signals one’s relative wealth, which in turn determines one’s status or social rank, which is important to subjective well-being. Intuitively one would expect the relationship between size of living space and status to be more linear than pathway one. For a single person, moving from a 2 bedroom flat to a 3 bedroom flat is unlikely to facilitate many more activities but it will deliver status by virtue of the higher property value.

The policy implications of space influencing subjective well-being through pathway one and two are entirely different. Pathway one implies that an increase in average levels of living space would facilitate more household activities, and therefore increase societal well-being. Contrastingly, pathway two implies that individuals derive subjective well-being not from having more space in itself, but from having more space than other people. Thus increasing average levels of living space- through minimum space standards, for instance- is unlikely to have much effect on societal well-being. Instead, it is the distribution of living space that matters. According to the logic posited by Frank (2007) and Wilkinson and Pickett (2009) a more equal distribution of space would reduce the anxiety and sense of inferiority felt by those at the bottom and middle of the space distribution. So how do we distinguish between these pathways? One way is through the shape of the relationship. As noted, pathway two implies a more linear relationship between space and subjective well-being than pathway one. An additional way is through looking at how the relationship differs between genders.

There is substantial quantitative evidence to suggest that economic variables are more important to the status of men than women. Mayraz et al. (2009) found income comparisons to be a much better predictor of subjective well-being for men than women. Using econometric techniques on national panel datasets, Clark (2003), Clark et al. (2010) and Shields et al (2009) all found that the subjective well-being of unemployed men rises when faced with other people’s unemployment at the regional level. None found any effect for women, apart from Clark (2003) who found a weak relationship. Furthermore, there is qualitative evidence that housing means more to men as a symbol of economic status than it does to women, who instead emphasise the home as a source of social status (Seeley et al. 1956; Rainwater 1966); and that men use objective terms to describe their homes, whereas women use more subjective terms (Gutmann 1965; Carlson 1971). All of the above suggests that, as an indicator of wealth, size of living space will matter more for the status of men than women. Consequently, pathway two should be stronger for men than women. There does not appear to be any literature to suggest that pathway one will be gendered once employment status and hours spent doing housework are controlled for. Therefore, if pathway two is present, we would expect size of living space to have a larger effect on the subjective well-being of men than women.

The Dynamic Aspect of the Relationship

In the above literature review we discussed the direction, shape and magnitude of the relationship between size of living space and subjective well-being, and how these may differ according to (1) gender and (2) the pathways through which space affects subjective well-being. It is also important to know whether the relationship varies over time. According to standard economic theory, any increase in subjective well-being in the year after an increase in living space should be sustained over time, ceteris paribus. However, several studies have found that increases in housing and life satisfaction associated with moving house diminish over time, in a process which can be loosely defined as adaptation. Using Australian Panel Data, Frijters et al. (2011) found a positive effect of moving house (for all reasons) on life satisfaction but this effect lasted for 6 months only. Nakazato et al. (2011) examined the effect of moving for housing related reasons on the life satisfaction and housing satisfaction of 3658 participants in the German Socio-Economic Panel. In this scenario, moving house led to an increase in housing satisfaction but this was only partially sustained over the 5 years post-move. They found no effect on life satisfaction. Findlay and Nowok (2012) examined the trajectories of different domain satisfaction judgements after internal migration in the BHPS and similarly found housing satisfaction to take a downward post-move trajectory. The exception is Nowok et al. (2013), who found no evidence of adaptation in life satisfaction judgements. Again using the BHPS, they found that moving house (for any reason) was preceded by a period when individuals experienced a significant decline in life satisfaction. Moving house brought life satisfaction back to initial levels where they remained for the next 5 years (and perhaps longer). Their findings are therefore more consistent with standard economic theory.

The post-move downward trajectories of housing satisfaction and subjective well-being are consistent with adaptation theory (or set point theory), which contends that individuals have stable levels of subjective well-being shaped by genetics and personality. Deviations from the set-points may occur but their effects are usually transitory. However, as Nakazato et al. (2011) point out, adaptation theory is limited as it does not explain why these effects are transitory. There are two explanations—as follows- for why the increase in housing satisfaction after an improvement in living conditions is not sustained.

First, according to the aspiration spiral theory (Stutzer, 2004), after improving their living conditions, individuals could simply shift their expectations upwards; “now I have a 3 bedroom house, I want a 4 bedroom house.” (Nakazato et al. 2011). Housing satisfaction judgements are generally thought to be constructed by individuals according to how their current housing situation relates to their preferred housing situation (Galster and Hesser 1981). For alternative theories of housing satisfaction, see Jansen (2014). According to this logic, an increase in living space will initially close the gap between one’s preferred housing situation and reality, leading to an initial increase in housing satisfaction. But over time this gap will re-emerge causing any uplift in housing satisfaction to diminish. While housing preferences can be influenced by “relevant others” (Vera-Toscano and Ateca-Amestoy 2008), theoretically the aspiration spiral theory need not involve social comparisons.

The second explanation for the post-move decrease in housing satisfaction is distinction bias (Hsee and Zhang 2004). In the year after moving to larger accommodation, individuals view their new house in direct comparison to their old house in a joint evaluation, so space is particularly salient. Over time, however, the new house will be viewed in isolation in a separate evaluation. Because space is not a naturally salient housing characteristic (i.e. it is not intrusive or unpredictable), its salience will decrease, and housing satisfaction judgements will diminish accordingly.

Housing satisfaction is not an indicator of subjective well-being itself. But according to the theoretical model of Van Praag et al. (2003), life satisfaction judgements are a function of different domain satisfaction judgements. Thus housing conditions affect housing satisfaction, which in turn affects life satisfaction. Because subjective well-being is a function of housing satisfaction, it should take a similar (although smoother) trajectory over time i.e. decrease before the move; increase in the year after the move; and decrease thereafter.

However, it may be that space influences subjective well-being independently of housing satisfaction. According to the hedonic treadmill theory, novel stimuli are more likely to lead to positive/negative affect as they are more likely to draw attention (Schimmack 2001; Wilson and Gilbert 2008). Initially more space will lead to an increase in positive affect, which will be reflected in higher experiential and evaluative well-being (Schimmack et al. 2002b). Over time, however, the novelty will wear off and subjective well-being will return to its previous levels. The hedonic treadmill theory does not predict adaptation in housing satisfaction judgements as these should not be influenced by positive/negative affect (Nakazato et al. 2011).

Alternatively, the influence of housing satisfaction judgements on subjective well-being may change throughout the moving process. It is in the interest of an individual’s subjective well-being to place more emphasis on those life domains that most satisfy them. This is formally demonstrated by Bradford and Dolan (2010), in what they define as the global adaptive utility model. According to their model, the importance of housing should increase when levels of housing satisfaction increase, and decrease when housing satisfaction decreases. Therefore decreases in housing satisfaction should have little influence on life satisfaction judgements. Contrastingly, increases in housing satisfaction should be amplified in life satisfaction judgements.

Summarising, the existing literature predicts that size of living space will be positively related to subjective well-being and housing satisfaction. Pathway one implies the relationship will have diminishing marginal utility, whereas pathway two implies a more linear relationship. The literature on gender suggests that if pathway two exists, space should have a larger impact on men’s subjective well-being. In terms of the dynamic relationship, distinction bias and aspiration spiral theory both imply that any increase in housing satisfaction associated with moving to larger accommodation will diminish post-move. According to Van Praag et al. (2003), subjective well-being should take a similar, although smoother, trajectory to housing satisfaction. In contrast, the global adaptive utility model and the hedonic treadmill theory both imply that subjective well-being will take a different trajectory to housing satisfaction. It is therefore important that we look at the effect of space on subjective well-being, and housing satisfaction separately.