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Designing Affordable Housing: Theory and Empirics

Paper Session

Sunday, Jan. 5, 2025 8:00 AM - 10:00 AM (PST)

Hilton San Francisco Union Square, Yosemite B
Hosted By: Econometric Society
  • Chair: Rebecca Diamond, Stanford University

Optimal In-Kind Redistribution

Zi Yang Kang
,
Harvard University

Abstract

In this paper, we develop a model of in-kind redistribution where consumers participate in either a private market or a government-designed program, but not both. We characterize when a social planner, seeking to maximize weighted total surplus, can strictly improve upon the laissez-faire outcome. We show that the optimal mechanism consists of three components: a public option, nonlinear subsidies, and laissez-faire consumption. We quantify the resulting distortions and relate them to the correlation between consumer demand and welfare weights. Our findings reveal that while private market access constrains the social planner's ability to redistribute, it also strengthens the rationale for non-market allocations.

The Welfare and Targeting Impacts of Public Housing vs Vouchers: Lottery Evidence from Miami

Robert Collinson
,
University of Notre Dame
Winnie van Dijk
,
Yale University
Daniel Waldinger
,
New York University

Abstract

Leveraging a unique affordable housing lottery in Miami, FL, we compare the welfare and targeting properties of public housing and vouchers (two of the largest federal affordable housing programs).

Pricing priorities in waitlists

Filip Stefan Tokarski
,
Stanford University

Abstract

I study the problem of introducing pricing into waitlists when extracting revenue from participants is undesirable. The designer hands out heterogeneous goods to arriving agents and aims to maximize allocative efficiency. She can incentivize agents to join socially optimal waitlists by charging joining fees and allowing agents to pay to reduce their wait-time. I show that screening through wait-times, while not wasteful, can only extract information about agents’ relative values for the offered goods. In contrast, using payments incurs waste but allows for screening on absolute valuations, improving allocative efficiency. This trade-off has a relatively simple resolution: the optimal mechanism charges a price for joining only one of the waitlists and offers a discrete menu of pay-to-skip options.

Where to Build Affordable Housing? Evaluating the Tradeoffs of Location

Cody Cook
,
Stanford University
Pearl Z. Li
,
Federal Trade Commission
Ariel Binder
,
U.S. Census Bureau

Abstract

How does the location of affordable housing affect tenant welfare, the distribution of assistance, and broader social objectives such as racial and economic integration? Using administrative data on households living in units funded by the Low-Income Housing Tax Credit (LIHTC), we first show that tenant characteristics such as income, race, education, and family structure vary widely across neighborhoods, despite common eligibility thresholds. To quantify the welfare implications, we develop and estimate a residential choice model in which households choose from both market-rate and affordable housing options, where the latter are priced below-market and must be rationed. Moving a new development to a neighborhood with less poverty and better access to good schools and jobs increases aggregate tenant welfare and reduces both racial and economic segregation. However, it is also more costly to provide and disproportionately benefits more moderate-need, non-Black/Hispanic households. This change in the distribution of assistance arises in part because of the rationing process: households that only apply for assistance in opportunity-rich neighborhoods crowd out other households willing to apply anywhere. Relative to the choice of where to build, policy levers available post-construction—such as lowering the eligibility thresholds—have only limited effects on outcomes.

Discussant(s)
Andrew Ferdowsian
,
University of Notre Dame
Tim McQuade
,
University of California-Berkeley
Neil Thakral
,
Brown University
Ali Shourideh
,
Carnegie Mellon University
JEL Classifications
  • D47 - Market Design
  • R31 - Housing Supply and Markets