The Relation Between Rents and Incomes, and 

 the Distribution of Rental Values 



By W. C. HELMLE 



Synopsis: Many parts of telephone plant, such as central office buildings 

 and equipment, conduits, underground and aerial cable at the time of 

 installation must have the capacity to handle not only the immediate 

 demand for telephone service, but also to take care of growth for a number 

 of years to come. In order to engineer such items of telephone plant 

 economically it is necessary to know in advance as accurately as possible 

 what the demand for telephone service will be five, ten, or twenty years 

 in the future. Forecasts of the future market are very necessary 

 for plant engineering, operating plans, rate treatment, and other purposes, 

 in multi-central office cities. In such cities detailed estimates are made 

 of the market some twenty years ahead and of its telephone development 

 under stated rate conditions. Such estimates are called commercial surveys, 

 and they involve a study of the various factors which, in the course of events, 

 will be likely to control the industrial, commercial and residential develop- 

 ment of the city concerned. 



In the course of such a survey, a rental classification of all families is 

 obtained and at the same time a record is made of existing telephone service 

 in each rental class. The rent data of this article have been gathered in 

 representative large cities throughout the country and the results as here 

 set forth are being used together with many other kinds of data to guide 

 the engineering of future additions to the plant of the Bell Telephone System. 



In general the income of a family is an index of the market it creates for 

 various commodities including telephone service. Rental values may also 

 be considered as such an index and the present study seeks to correlate rents 

 with incomes. Rents can be readily recorded and classified, whereas it is 

 not feasible to determine the money incomes of large numbers of families. 

 While it may be ideally possible, by a study of rent data, to compare the 

 inherent markets for telephone service and also the strength of the tele- 

 phone habit in various cities, there are many practical limitations to such 

 a procedure. Comparison of the residence market for telephone service 

 in different cities, as determined by rent values, is made difficult by the 

 fact that the variation between cities in rentals paid for substantially similar 

 dwellings is considerably greater than the variation in prices for food or 

 clothing. Further, there is considerable variation in rent levels even in 

 different sections of any one city. Attempts to compare rent distribu- 

 tions by application of the usual statistical measures of dispersion and 

 skewness have proved unsatisfactory. However, a method of charting 

 has been found by which rent distributions may be readily compared 

 with one another and an index of spread or dispersion determined. It 

 has been found that cumulative curves of rent distribution may be plotted 

 on logarithmic probability paper to yield straight lines for a large number 

 of cities. These are called logarithmic skew distributions. Although it 

 has not been found possible to assign any special significance to the par- 

 ticular value of the index of rent dispersion in any city, this index appears 

 to remain practically constant for that city regardless of changes in the 

 level of prices. In the appendix the mathematical features of the loga- 

 rithmic skew curve are discussed. — Editor. 



TT is a well recognized fact that the better class families, i.e., those 

 -■- with higher incomes, are a better market for telephone service 

 than the poorer families. For purposes of market analysis in com- 

 mercial surveys it is not feasible to determine the money incomes 

 received by families but the rental values of dwellings, which, as 



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