Housing Markets
Paper Session
Sunday, Jan. 9, 2022 12:15 PM - 2:15 PM (EST)
- Chair: Katherine O'Regan, New York University
Housing Price and Macroeconomic Interactions in Equilibrium: A Walk down Memory Lane
Abstract
We investigate how macroeconomic variations govern equilibrium housing prices by identifying effect-transmissions separately via demand and supply functions of housing within a memory-embedded interactive system. Using quarterly data for the US during 1975-2016 and a fractionally cointegrated vector-autoregressive model, we reveal dominant reactions of housing demand against relatively inelastic responses on the supply-side at equilibrium when facing the same macroeconomic variations. Long-memory featured error corrections make the housing market - macroeconomic system dynamically inefficient and asymptotically stable. This further explains why housing markets often respond slowly to macroeconomic interventions. Forecasting exercises and restrictions in parameter-space reassure robustness of our findings.Why Are More Young Adults Living With Their Parents? A role for housing affordability
Abstract
As of July 2020, 52 percent of American young adults (under 30 years old) lived with their parents. By July 2021, this share had decreased to 49 percent, still an historic high. The pandemic increase followed a fifty-year secular rise in such living arrangements. This paper reviews factors that help explain these short and long-term shifts through increasing housing costs relative to income and the impact of the COVID-19 pandemic induced recession and earlier economic shocks. The paper contributes to the literature on household formation by showing that the increase in the share of young adults living with their parents over the past several decades is larger in areas with high housing costs relative to income. The results point to a newly important role of housing affordability as a factor in explaining the sustained decrease in household formation experienced in the US including amid the COVID-19 recession.How to Reduce Housing Costs? Understanding Local Deterrents to Building Multi-Family Housing
Abstract
This paper studies how local land-use regulations and local community opposition affect the trade-offs to build single-family, multi-family, or affordable housing and affect rent and housing prices differently. Using lot level zoning regulations and a boundary discontinuity design at regulation boundaries in the Greater Boston Area, we obtain causal estimates for the effect of zoning regulations on the supply of different types of housing, single-family house prices, multi-family rents, and households' willingness-to-pay for higher density. We find that relaxing density restrictions (minimum lot size and maximum dwelling units), either alone or combined with relaxing height restrictions or allowing for multi-family housing, are the most fruitful policy reforms to increase supply and reduce multi-family rents and single-family prices. However, enabling multi-family zoning or relaxing height regulations alone has little impact on increasing the number of units built and lowering rents. Moreover, each land-use relaxation scenario where the rental costs fall is accompanied by falling house prices, complicating the political economy of land-use reform. We also find that the mature suburbs closer to the city center with representative town meeting structure of local governance are most restrictive in adding multi-unit housing. Furthermore, inclusionary zoning policies like Chapter 40B rarely substitute for relaxing zoning policies, particularly for building multi-family housing.Discussant(s)
Jan Brueckner
,
University of California-Irvine
Lara Loewenstein
,
Federal Reserve Bank of Cleveland
Kwan Ok Lee
,
National University of Singapore
Leah Brooks
,
George Washington University
JEL Classifications
- R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location