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Affordable Housing

Paper Session

Friday, Jan. 4, 2019 2:30 PM - 4:30 PM

Hilton Atlanta, 215
Hosted By: American Real Estate and Urban Economics Association
  • Chair: Scott Frame, Federal Reserve Bank of Atlanta

Affordable Housing and City Welfare

Stijn Van Nieuwerburgh
,
Columbia University
Jack Favilukis
,
University of British Columbia
Pierre Mabille
,
New York University

Abstract

Housing affordability has become the main policy challenge for the major cities of the world. Two key policy levers are zoning and rent control. We build a new dynamic spatial equilibrium model to evaluate the effect of these policies on house prices, rents, labor supply, production, residential construction, income and wealth inequality, as well as the location decision of households within the city. The model incorporates risk, wealth effects, and dynamic spatial equilibrium. We calibrate the model to the New York MSA, incorporating current zoning and rent control policies. Our model suggests sizable welfare gains from relaxing zoning regulations in the city center. That policy is progressive; it reduces overall inequality but increases spatial inequality between neighborhoods. In contrast, policies that decrease the size of the rent control system are welfare reducing. The concentrated losses of the poor outweigh the efficiency gains from a better spatial allocation of labor and housing. The same trade-off is present for a housing voucher program.

Not In My Neighbor's Back Yard? Laneway Homes and Neighbors' Property Values

Tsur Somerville
,
University of British Columbia
Thomas Davidoff
,
University of British Columbia
Andrey Pvlov
,
Simon Fraser University

Abstract

"In Vancouver, as in many ""Superstar Cities,"" low density zoning in residential neighborhooods is both a sacred cow of amenity preservation and a scapegoat for unaffordability. In 2008, the City Council allowed homeowners to build small "laneway homes" behind the main residential structure on qualifying lots in all of the city's single family zones. We exploit this regulatory change to study the externalities that infill housing imposes on neighboring property values. Laneway homes are most commonly built when the main home is substantially rebuilt and generally reduce the size of rear garages. Neighbors who build laneway homes thus add little physical density but impose a household of renters on neighbors. Overall we find a small negative spillover that is not statistically different from zero, suggesting that the negative externalities of population density may be small. We do not need a stronger negative effect in more expensive neighborhoods or on fancier homes, but the negative spillover is statistically different from zero and larger in magnitude on properties with larger lots (-11.2%)."

Political Control of the State Legislature and Municipal Bond Financing for Affordable Housing

Eunkyu Lee
,
Baruch College
Yildiray Yildirim
,
Baruch College

Abstract

This study investigates whether the tax-exempt municipal bonds have any effect on housing affordability at the state level. Specifically, we compare two different types of housing bonds: Multifamily Housing Bonds that support private affordable housing developers in the rental market and Mortgage Revenue Bonds that support low-income households who want to become a homeowner with a low-interest mortgage. In order to estimate the issuance volume of the housing bonds, we use the political control of the state legislature as an instrument, and find that Democratic or divided-controlled state legislature issues a larger volume of per-capita housing bonds, compared to the Republican-controlled legislature. We also find that, controlling for other affordable housing programs, a 10 percent increase in per-capita Multifamily Housing Bonds leads to a 0.7-0.8 percent decrease in the number of renter households facing housing cost burdens. However, Mortgage Revenue Bonds increase the number of owner-occupied households facing the cost burdens in the home-owner sector, contrary to the rental market analysis. The results imply that there is a shift of households from the rental market to the owner-occupied market with the financial support of low-interest mortgages, but those new homeowners still face housing cost burdens.

Waiting Lists, Lotteries and Public Housing: Natural Experiment Evidence from Amsterdam

Arno Van Der Vlist
,
University of Groningen
Jos Van Ommeren
,
Vrije University Amsterdam

Abstract

Public housing is allocated to households either through waiting time or through lotteries. We examine outcomes of both nonmarket allocation mechanisms for Amsterdam. Our identification strategy is based on information from a natural experiment where vacant public houses are allocated using lotteries to households who are also on waiting lists. We use the households’ waiting times to elicit information on the value of winning a lottery. Winning a lottery reduces waiting time by 6.5 years implying misallocation across households, which are less selective in accepting public housing offers. A welfare loss is also implied by demonstrating lottery-induced changes in the distribution of observed household characteristics allocated to public houses. Although a lottery seems to reduce welfare, it offers fundamental advantages to winners who value their gain at about €50,000.
Discussant(s)
Timothy James McQuade
,
Stanford University
Jaison Abel
,
Federal Reserve Bank of New York
Chandler Lutz
,
U.S. Securities and Exchange Commission
Kristopher Gerardi
,
Federal Reserve Bank of Atlanta
JEL Classifications
  • R1 - General Regional Economics
  • R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location