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  3. 2026
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  5. Housing Affordability Policies
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Housing Affordability Policies

Paper Session

Saturday, Jan. 3, 2026 10:15 AM - 12:15 PM (EST)

Loews Philadelphia Hotel, Washington B
Hosted By: American Real Estate and Urban Economics Association
  • Chair: Kyle Mangum, Federal Reserve Bank of Philadelphia

Build What and for Whom? The Distributional Effects of Housing Supply

Lei Ma
,
Boston University

Abstract

New construction has favored bigger, more expensive houses. This paper studies the causes of this pattern and evaluates the equilibrium impacts of proposed housing policies aimed at improving affordability at the lower end of the market. I develop an equilibrium model of segmented housing markets with two key features: (1) heterogeneous household preferences for housing quality by demographics, and (2) endogenous housing supply with heterogeneous development costs by housing quality. Using microdata on household housing choices and parcel-specific development costs for single-family homes in the Atlanta MSA, I find that the shift toward large home construction is partly driven by demand from high-income households, who are less price-sensitive and prefer larger homes, but zoning density restrictions play a more significant role in limiting the construction of smaller homes. Relaxing these restrictions could expand the supply of small homes and benefit low-income households, but such zoning reforms are often politically challenging. As an alternative, I evaluate the impact of recently proposed housing subsidies targeting first-time homebuyers and starter homes. The model predicts that subsidizing young, low-income households provides substantial targeted welfare gains to recipients but hurts others due to rising prices.

Housing Vouchers and Neighborhood Effects: Can Expanding Access to Opportunity Pay for Itself?

JoonYup Park
,
University of Hawaii-Manoa

Abstract

This paper studies the impact of Small Area Fair Market Rents (SAFMR), a major reform to the voucher program that adjusts rent ceilings to a finer ZIP-code level variation, on voucher households' neighborhood and economic outcomes, and their interaction with the fiscal and non-fiscal components of program operation. Using a difference-in-differences design, I find that SAFMR improved voucher holders' relocation to higher-rent, lower-poverty neighborhoods. These effects were especially pronounced in metropolitan areas with high levels of residential segregation. Consistent with the neighborhood effects literature, relocation to high-opportunity neighborhoods increased household income and rent contributions, contributing to declines in federal spending per voucher. However, the reform did not expand program reach. Long-run evidence from the first SAFMR adopter shows that federal per-unit costs eventually rose as the number of subsidized households in high-rent areas outweighed the income-driven savings, resulting in a contraction in the number of households served. These findings highlight a key trade-off: while SAFMR generates fiscal efficiencies in the short run, its long-term financial sustainability remains uncertain under a fixed program budget.

Housing Assignment with Endogenous Supply: Theory and Application to Rent Control

Jimmy Ho
,
Washington University in St. Louis
Yulin Hong
,
City University of Hong Kong
Zhongji Wei
,
Chinese University of Hong Kong
Michael Bo-Lin Wong
,
University of Hong Kong

Abstract

We analyze how rent control affects the rent and quality distributions of uncontrolled housing using novel assignment-model frameworks with endogenous supply. Unlike prior models, we endogenize the housing quality distribution by incorporating both developer construction and costly landlord adjustments to existing stock. We first analytically show in a discrete-quality model that rent regulation may have opposite impacts on uncontrolled rents across the quality distribution. A continuous-quality model is then characterized by numerically solving integro-differential equations. We calibrate the model to data from Hong Kong to assess the impact of rigid public housing rents on the private housing sector. We find that rigid public housing rents increased the rents of uncontrolled low-quality housing and worsened the proliferation of tiny subdivided units.

Insights from a Pilot Principal Poverty Measure

Ingrid Gould Ellen
,
New York University
Rosemary Hyson
,
CUNY-Baruch College
Sanders Korenman
,
CUNY-Baruch College

Abstract

While urban economists have not traditionally studied poverty measurement, choices about how to incorporate housing costs, geographic disparities in those costs, and implicit rental income have critical implications for the distribution of poverty rates across regions and sub-populations. This paper tests a new approach to incorporating housing, health and food into a poverty measure. Specifically, it implements a pilot version of the Principal Poverty Measure (PPM), a revision of the Census Bureau’s Supplemental Poverty Measure (SPM) recommended by a 2023 NAS consensus study. Our pilot PPM threshold (poverty line) uses policy-based needs standards, including Fair Market Rents from HUD. PPM resources include cash income from all sources, in-kind benefits such as public or private health insurance, rental assistance, and, for homeowners, an implicit resource flow from homeownership.

We find key differences with the SPM. First, the inclusion of implicit rent reduces the PPM rate for homeowners relative to renters. Second, because the PPM housing needs incorporate housing-specific economies of scale, the PPM raises the housing needs of smaller households relative to larger households. Further, the PPM estimates that housing assistance delivers relatively greater benefits for smaller renter households, suggesting that housing assistance does more to reduce poverty for smaller households.

Discussant(s)
Betty Wang
,
University of Hong Kong
Eunjee Kwon
,
University of Cincinnati
Marco Giacoletti
,
University of Notre Dame
Jorge De la Roca
,
University of Southern California
JEL Classifications
  • R2 - Household Analysis