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Housing Market Dynamics

Paper Session

Friday, Jan. 5, 2024 8:00 AM - 10:00 AM (CST)

Marriott Rivercenter, Conference Room 10
Hosted By: American Real Estate and Urban Economics Association
  • Chair: Carlos Hurtado, University of Richmond

The Impact of Buy-to-Let Investors: Quasi-Experimental Evidence from a Dutch Reform

Sjoerd van Bekkum
,
Erasmus University Rotterdam
Marc Francke
,
University of Amsterdam
Lianne Hans
,
Kadaster
Matthijs Korevaar
,
Erasmus University Rotterdam
Paul de Vries
,
Kadaster

Abstract

How do buy-to-let investors impact house prices and the income composition of residents? We investigate this question by examining a Dutch legal ban on buy-to-let investments, featuring strong within-city discontinuities in coverage. Our analysis utilizes administrative data on household balance sheets and property-level information on housing transactions, ownership, and residency. We demonstrate that the ban effectively reduced investor purchases, leading to a considerable increase in the proportion of first-time homebuyers. However, the removal of investors from the market did not have any discernible impact on house prices, even in areas where they previously purchased a significant fraction of properties. Instead, we find a considerable effect on the income composition of residents: holding the property constant, households in investor-purchased properties had substantially lower incomes compared to those in owner-occupied properties. Our findings suggest that investors primarily influence local housing markets through their impact on residential composition rather than direct price effects.

Search for Yield in Housing Markets

Pedro Gete
,
IE University
Carlos Garriga
,
Federal Reserve Bank of St. Louis
Athena Tsouderou
,
University of Miami

Abstract

We study how investors in single-family housing markets have changed after the 2009
Global Financial Crisis (GFC) and the consequences for the markets and the economy.
We document several new facts for small and medium-sized investors: (a) The investors
after the GFC choose locations with the potential to earn high rental yield (b) Most new
investors are less likely to sell the properties in the short-term in response to capital gains.
(c) Consistent with a buy-and-hold strategy, the new investors have stronger preferences
for safer locations.

Housing Market and Capitalization of Information: Case of Land Leases

Heidi Falkenbach
,
Aalto University
Oskari Harjunen
,
Aalto University and VATT Institute for Economic Research
Erik Mäkelä
,
University of Turku
Elias Oikarinen
,
University of Oulu and Aalto University

Abstract

We study how the announced future land rent increases capitalize into leasehold apartment prices. We investigate a case, where the City of Helsinki, Finland, announced over 15-fold rent increases for the ground lease contracts on residential land that were expiring in the near future. Our empirical strategy is based on a difference-in-differences design where we compare transactions of the leasehold units with those of near-identical freehold apartments. We find that before the first rent increase episode homebuyers were inattentive to their expected long-run housing expenses, which resulted in significant overpricing of leasehold apartments relative to corresponding freehold units. The results further suggest that housing market participants react on announced contract renewals and appear to learn the importance of the ground ownership feature when they are exposed to more and more information regarding rental contract updates.

An Index of Local Zoning: How Does It Correlate with House Prices?

Susan Wachter
,
University of Pennsylvania
Richard Voith
,
Econsult Solutions
Desen Lin
,
California State University-Fullerton
David Stanek
,
Econsult Solutions

Abstract

The regulation of land use through zoning in the United States is a complex matter, as it is the responsibility of numerous local authorities, including municipalities and counties. Consequently, there exists considerable variation in zoning ordinances from one jurisdiction to another, making it challenging to assess the impacts of zoning on a large scale. While the literature recognizes the importance of zoning in land use regulation, prior studies have either been geographically restricted or relied on surveys of administrators to obtain information about zoning ordinances. This paper introduces a novel land use restrictiveness index that provides local-level estimates of the number of housing units allowed per acre under municipal zoning ordinances in census block groups. We demonstrate that zoning has a more pronounced effect on house prices in the upper end of the price distribution across different states, and we provide estimates of the price elasticity of restrictiveness by state and by percentile of state-level price distributions.

Discussant(s)
Christopher Luke Watson
,
Michigan State University
Malin Hu
,
Vanderbilt University
Tracy Margo Turner
,
Iowa State University
Jonathan Moreno-Medina
,
University of Texas-San Antonio
JEL Classifications
  • R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location
  • R5 - Regional Government Analysis