Article

On Local Housing Supply Elasticity

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Abstract

Housing markets have been established as fundamental to understanding business cycles, financial market stability, labor mobility, household wealth, individual portfolio allocation, and urban dynamics. What determines local housing supply elasticities and prices? In this paper I give empirical content to the concept of land availability by processing satellite-generated data on elevation and presence of water bodies to precisely estimate the amount of developable land in each metro area. I demonstrate that development is effectively curtailed by the presence of slopes above 15% and that most areas that are widely regarded as supply-inelastic are, in fact, severely land-constrained by their topography. Furthermore, the extent of topographical constraints correlates positively and strongly with regulatory barriers to development. Immigration, high taxes, politics, and "communitarian" social capital are also predictive of more restrictive residential land regulations. I estimate a system of equations where housing prices, construction, and regulations are all determined endogenously. Housing supply elasticities can be well-characterized as functions of both physical and regulatory constraints, which in turn are endogenous to prices and past growth. The results provide operational estimates of local supply elasticities in all major US metropolitan areas.

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... Although a voluminous empirical literature examines the influence of public goods on the housing market, it has typically been assumed that the stock of housing is fixed. 1 2 With supply fixed, the housing market clears shocks to local amenities exclusively through price adjustments (i.e. through capitalization). If housing supply is elastic, however -and a developing literature suggests it is (Glaeser and Gyourko 2002, Glaeser, Gyourko, Saks 2006, Saiz 2008, and Saks 2008) -a shock to a community's fiscal amenities will induce both a price and a quantity response. This paper, therefore, examines the response of residential construction to differences in fiscal amenities across communities. ...
... Most recent papers have examined the across-MSA elasticity of supply (e.g. Glaeser, Gyourko and Saks 2006, Gyourko and Saiz 2006, Gyourko 2008, and Saiz 2008. The analysis suggests that the housing supply response to a region-wide demand shock is intensely concentrated at the urban fringe -far more concentrated than the geographic distribution of overall building activity. ...
... They are therefore consistent with theoretical work suggesting relatively more dense and developed areas endogenously engage in more stringent land use regulation (Rudel 1989, Fischel 2001a, Hilber and Robert-Nicoud 2006and Ortalo-Magné and Prat 2007. The results can also be seen as complementary to those in Saiz (2008) which document a similar causal relationship running from development and density to regulation, but over a much longer time horizon than examined here. ...
Article
This study asks if local governments that provide a high level of public services per tax dollar attract housing capital. The first portion of the paper examines large shifts in property tax burdens induced by an unusual school finance reform in the state of New Hampshire. The estimates suggest that, in most of the state, communities with a reduced tax burden experience a large increase in residential construction. In the area of the state near the region's primary urban center (Boston), however, the shock clears through a price adjustment -- i.e., by capitalizing into property values. The differing responses are attributed to differing housing supply elasticities. Furthermore, the shock induced communities with a lowered tax burden to enact more stringent land use regulations. The second portion of the paper uses a national sample and exploits variation in education spending levels arising from 1980s era school finance reforms. The results confirm the findings from New Hampshire -- fiscal amenities have a significant impact on the location of residential capital and the impact is largest outside of dense, urban areas. These results, which are interpreted through the lens of a simple theoretical model, have important implications for a host of issues, including the equity and efficiency of local public goods provision, assessing who bears the burden of local taxation, and land use issues such as the location and pace of residential development and the causes of land use regulation.
... It is well established that land is the most basic input in creating new housing units or generating housing supply (Glaeser and Gyourko, 2005;Glaeser et al., 2006;Saiz, 2008;Saks, 2008;Sinai, 2010;Grimes and Aitken, 2010). In Israel, land is frequently owned and managed by the state which is unusual for a developed market economy (Werczberger and Borukhov, 1999). ...
... In most cases housing supply is unavoidably sticky because the building of new homes takes time and supply cannot respond instantaneously to a rise in demand (Grimes and Aitken, 2010). When examining the determinants of housing supply, two major inputs are prevalent: land and structures (Saiz, 2008). Research shows that the cost of structures differs widely between regions (in the US) but still cannot explain housing prices differences (Gyourko, 2009). ...
... Previous studies have identified a number of major factors affecting the supply of land for housing: land supply elasticity, land prices and price dynamics, land use regulation, land ownership (private or public), construction costs and topography constraints (Glaeser and Gyourko, 2005;Glaeser et al., 2006;Saiz, 2008;Saks, 2008;Sinai, 2010;Grimes and Aitken, 2010;Peng and Wheaton, 1994;Ihlanfeldt and Mayock, 2014). From these studies, we can essentially conclude that the amount of developable land for housing determines land supply elasticity and as a result housing supply elasticity (Saiz, 2008;Saks, 2008). ...
Article
House prices in Israel have risen since 2008 by as much as 98%. Much of this increase is attributed to low levels of housing supply and housing supply elasticities. In Israel land is frequently owned by the state. This results in heavy government involvement in the housing market through the control of land supply via land tenders. This paper estimates the impact of state owned land on the Israeli housing market focusing on these unusual conditions of land supply. A model for the creation of new housing units is proposed. This incorporates land tenders, enabling the estimation of housing supply dynamics with an accurate measure of public land supply. The model is tested using regional panel data which facilitates the dynamic estimation of national and local supply elasticities and regional spillovers. The paper uses novel data sources resulting in a panel of 45 spatial units over a span of 11 years (2002–2012). Due to the nonstationary nature of the data, spatial panel cointegration methods are used. The empirical results yield estimates of housing supply price elasticities and elasticities with respect to land supply. Results show that housing supply is positively impacted by governmental decisions but the impact is low. Supply elasticity with regard to government land tenders stands at around 0.05 over the short run and 0.08 over the long run. Government policy of offering land in low demand areas and fixing minimum-price tendering does not seem to affect housing supply. Policy implications point to the need for more sensitive management of the delicate balance between public and private source of land in order to mitigate the excesses of demand shocks.
... In this model, supply elasticity is estimated by a function of population (n), average transportation cost (k), average house price, cost of capital (l), city growth rate (g), a proportionality factor that is increasing with population density ( ) and income ( y ) and property taxes ( p ). For 95 major U.S. metropolitan areas, one can also turn to Saiz (2007) and simply look up the relevant supply elasticities in Table 8. While linear approximations of supply curves are not uncommon in the literature (e.g., Van der Mensbrugghe 2005), the proposed pricing construct (Equation (7)) can easily be extended to incorporate dynamic elasticities via the Green et al. (2005) or Saiz (2007) models if there is concern that nonlinearity might cause erroneous price estimations. ...
... For 95 major U.S. metropolitan areas, one can also turn to Saiz (2007) and simply look up the relevant supply elasticities in Table 8. While linear approximations of supply curves are not uncommon in the literature (e.g., Van der Mensbrugghe 2005), the proposed pricing construct (Equation (7)) can easily be extended to incorporate dynamic elasticities via the Green et al. (2005) or Saiz (2007) models if there is concern that nonlinearity might cause erroneous price estimations. As an example, to imbed the Green et al. (2005) elasticity function, one can redefine parameter s as an auxiliary variable with time dimension ( s t ), replace s in Inequality (7) and simply add the following linear equation to the model: ...
... The three values for supply (in)elasticity were chosen to assess the sensitivity of optimal parcel attributes to different levels of competition in the land market. Although the proximity of the Seattle-Bellevue-Everett metro, for which a supply elasticity of 0.78 has been documented in Saiz (2007), has a huge impact on the land market of the study area, we felt that applying this figure in our model was simplistic given the unique nature of the Lopez Island market. Located just outside of the Seattle metro in the middle of the scenic Puget Sound, the housing market on Lopez Island is more akin to resort markets than to urban markets. ...
Article
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Urban growth compromises open space and ecosystem functions. To mitigate the negative effects, some agencies use reserve selection models to identify conservation sites for purchase or retention. Existing models assume that conservation has no impact on nearby land prices. We propose a new integer program that relaxes this assumption via adaptive cost coefficients, Our model accounts for the two key land price feedbacks that arise in markets where conservation competes with development: the amenity premium and price increases driven by shifts in market equilibriums. We illustrate the mechanics of the proposed model in a real land retention context. The results suggest that in competitive land markets, the optimal conservation strategy during the initial phase of the retention effort might be to use available dollars to buy fewer parcels with smaller total area that are under high risk of development. We show that failure to capture the landprice feedbacks can lead to significant losses in biological conservation. The present study is the first to create a reserve selection model that captures the economic theory of competitive land markets in a dynamic framework, produces tangible, parcel-level conservation recommendations, and works on problems with thousands of potential site selection decisions and several planning periods.
... One of the key parameters of investigation is housing supply elasticity, the sensitivity to which new housing investment responds to (changes in) existing house prices. While older studies mainly use national-level data over long time periods to draw quantitative conclusions about the price elasticity of housing supply, younger publications focus overwhelmingly on regional or local housing market data; recent contributions include Green et al. (2005), Meen (2005, Hwang and Quigley (2006), Goodman and Thibodeau (2008), , Ball et al. (2010) and Saiz (2010). The advantage of using local rather than national data in studying housing supply arises from the fact that housing markets are essentially spatially separated, following from the fact that houses are immobile and hence both produced and consumed locally. ...
... 3 For instance, Goodman and Thibodeau (2008) find an average elasticity of 0.62 for 95 US metropolitan areas with positive elasticity values analyzing data for two time periods, 1990 and 2000. Using comparable data, Saiz (2010) reports a population-weighted average of 1.75 in 2000. ...
... As a consequence, the pure cost of supplying housing structure in a given location should largely be independent of current local construction output. For small areas, this implies highly elastic construction supply schedules, a conjecture which has found strong support in the literature (Gyourko and Saiz, 2006;Saiz, 2010). 21 In contrast to the national view, local home construction costs are therefore best thought to be exogenous to local permit levels. ...
Article
This paper employs panel data on 413 German counties and cities from 2004 to 2009 to investigate the supply of new single-family housing in local housing markets. New local housing supply is measured by the annual number of construction permits in relation to the existing single-family housing stock. This supply indicator is econometrically related to existing home prices and new housing development costs, which include the costs of housing construction and vacant land in a given location. The results suggest that both higher prices for existing homes and recent increases in development costs are positively associated with local single-family home permit rates. Instead, higher levels of development costs turn out to dampen construction activity. The average local price elasticity of new single-family home supply is considerably less than one, with surprising differences across the urban hierarchy. --
... The dataset used in the analysis is constructed from three different sources. Housing The source for supply elasticity index is Saiz (2008). Saiz assigns land supply elasticity 3 The index data are available at http://www.fhfa.gov. ...
... As a result, some of the areas with the highest return volatility are associated with average returns from the middle to lower range of the sample during the 1984 to 2009 time period. Table 1 shows that the MSAs associated with the highest level of land supply elasticity 5 For the complete list of MSA land supply elasticities, see Saiz (2008). experience lower price volatility and appreciation compared with the cities with the lowest level of land supply elasticity. ...
... The housing price index data are obtained from the FHFA with quarterly frequency and include 102 quarters spanning the period between the first quarter of 1984 to the second quarter of 2009. Land supply elasticity values are fromSaiz (2008). ...
Article
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Housing data from the last 25 years show that returns to residential real estate in the U.S. can be volatile and vary significantly among locations. The variations in returns are driven by economically as well as geographically and psychologically motivated factors, but so far, no asset pricing model that adequately explains systematic risks in cross-sectional housing returns is widely accepted. This paper proposes an asset pricing model for housing returns that includes a market-wide return factor, an economically motivated factor derived from income growth, a geographically based factor derived from land supply elasticity and a momentum factor, which is psychological in nature. The model explains well the systematic risks in housing returns and is robust to different portfolio segmentations. Moreover, the model illustrates that local risk factors indirectly capture the risk previously attributed to market-wide price changes. While housing is not actively traded when compared to other financial assets, understanding the risk-factors that explain housing return in cross-section provides important insight for real estate investors, builders, real estate future traders, homeowners, banks and other mortgage lenders.
... The impact of housing supply elasticity on leverage growth is quite strong: a county level regression of the increase in the debt to income ratio from 2002 to 2006 on the Saiz (2008) measure of housing supply inelasticity shows a strongly positive correlation with an R 2 of almost 0.2. This motivates our final test of the relation between leverage growth and economic outcomes, which is the following instrumental variables specification: ...
... As a corollary, as counties with inelastic housing supply experienced sharper increases in house prices, existing homeowners aggressively borrowed against the value of their homes (Mian and Sufi (2009b)) and new homeowners were forced to take out larger mortgages to buy more expensive homes (Mian and Sufi (2009a)). The primary measure of housing supply elasticity we use in the previous studies comes from Saiz (2008), who constructs his measure based on geographical and topographical constraints on house construction. ...
... The data presented in this figure are from Nini, Smith, and Sufi (2009 The regression in columns 2 through 5 are weighted by the number of households in the county as of 2000. Column 5 reports coefficients from the second stage of an IV specification where the change in the debt to income ratio from 2002 to 2006 is instrumented with housing supply inelasticity of the county as constructed by Saiz (2008). Standard errors are clustered by state. ...
Article
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We present evidence that a primary culprit for the severe U.S. recession of 2007 to 2009 is the dramatic expansion in household leverage from 2002 to 2006. The aggregate evidence shows that house prices, mortgage default rates, fixed residential investment, and durable consumption were the first serious signs of weakness in the economy, and all four of these outcomes are closely linked to the preceding growth in leverage from 2002 to 2006. U.S. counties with large increases in debt to income ratios prior to the recession experienced significantly worse economic outcomes during the downturn. In addition, consumers who were more reliant on credit card borrowing reduced consumption by significantly more following the financial crisis of the fall of 2008. Our estimates show that household leverage growth and dependence on credit card borrowing explain a large fraction of the overall consumer default, house price, unemployment, residential investment, and durable consumption patterns during the recession. We conclude that a focus on household finance is crucial if we are to understand the sources of macroeconomic fluctuations.
... The third estimation approach follows a growing literature and proxies for supply elasticity based on measures of physical and regulatory constraints to development provided by Rappaport and Sachs (2003), Saiz (2008), and Gyourko et al. (2006). The steep slopes and bodies of water that generate physical constraints to supply growth are typically associated area's name. ...
... Measures of regulation or lack of buildable land are attractive in this way. As emphasized by Saiz (2008), however, these measures are correlated with demand, and hence likely with demand-side sources of variation in cycle amplitude. Identifying a role for elasticity with a measure of supply constraints as a proxy, given these measures would fail the exogeneity requirement of an instrumental variable, thus requires a satisfactory control variable approach. ...
... Three common measures of supply constraints are: the Rappaport and Sachs (2003) status as a Coastal market based on a threshold distance to an ocean, the Gulf Coast, or a Great Lake; the Saiz (2008) calculation of the fraction of land lost to steep slopes and water; and the Gyourko et al. (2006) measure of local regulatory intensity. I aggregate each of these measures to the census CBSA (or Metropolitan Division if applicable) level. ...
Article
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There is no evidence that differences in supply elasticity caused cross sectional variation among US housing markets in the severity of the 2000s housing cycle. This is true in three sets of empirical specifications: a first that assumes identical demand changes in the 2000s across markets, a second that proxies for supply elasticity and demand changes in the 2000s with estimates based on price and quantity changes in the 1980s, and a third that uses physical and regulatory constraints to proxy for supply elasticity and uses state fixed effects to capture variation in demand conditions.
... The third estimation approach follows a growing literature and proxies for supply elasticity based on measures of physical and regulatory constraints to development provided by Rappaport and Sachs (2003), Saiz (2008), and Gyourko et al. (2006). The steep slopes and bodies of water that generate physical constraints to supply growth are typically associated area's name. ...
... Measures of regulation or lack of buildable land are attractive in this way. As emphasized by Saiz (2008), however, these measures are correlated with demand, and hence likely with demand-side sources of variation in cycle amplitude. Identifying a role for elasticity with a measure of supply constraints as a proxy, given these measures would fail the exogeneity requirement of an instrumental variable, thus requires a satisfactory control variable approach. ...
... Three common measures of supply constraints are: the Rappaport and Sachs (2003) status as a Coastal market based on a threshold distance to an ocean, the Gulf Coast, or a Great Lake; the Saiz (2008) calculation of the fraction of land lost to steep slopes and water; and the Gyourko et al. (2006) measure of local regulatory intensity. I aggregate each of these measures to the census CBSA (or Metropolitan Division if applicable) level. ...
Article
Demand pressure, not supply inelasticity, explains coastal markets' high price volatility relative to other US markets in the housing cycle of 1998 through 2009. Relative to a comparison group of more elastically supplied markets facing similar historical demand pressure, coastal markets saw greater average price growth, but no worse crashes and no greater volatility. Price growth was as great in the comparison group as the coastal markets between 2004 and 2007, the years in which a bubble seems most likely to have operated.
... Land supply constraints may derive from topographical, infrastructural, administrative or financial limitations [29]. Public authorities can lift some of the policy restraints when making changes to land use regulations. ...
... Each of these types of government interventions deals with a different housing supply limitation (see Figure 1). Land supply constraints may derive from topographical, infrastructural, administrative or financial limitations [29]. Public authorities can lift some of the policy restraints when making changes to land use regulations. ...
Article
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Public authorities in developing economies typically have to deal with fiscal stress, lack of resources and an underdeveloped real estate industry. This poses a severe challenge at times of rapid urbanisation. Governments typically react to housing demand shocks by introducing policies that support the real estate market’s capacity to supply housing. One prominent policy in this respect is land readjustment. It has been promoted as a best practice and has been extensively discussed from an efficiency perspective; however, little is known about the ecological performance of the urban landscapes that typically emerge with this tool. Therefore, this study developed an assessment framework that allows discussion of the ecological performance of these neighbourhoods as an outcome of the reciprocal interaction between public sector initiatives and real estate market responses. Based on a LEED ND assessment of the cases of Taipei and Seoul, the research identifies four institutional drivers of ecological costs. First, public agencies tend to neglect the ecological costs of greenfield site developments. Second, public agencies to not employ policies that promoe brownfield developments. Third, a weak public sectors’ negotiating position can result in an ecologically inefficient urban pattern. And finally, the public sector’s construction standardisation policies can impose real estate market limitations and wasteful use of resources in the long run.
... I also consider the role housing supply elasticity and land use regulation might have played in the FHTC response. Figure 13 plots the FHTC effect residual against a measure of housing supply elasticity reported by Saiz (2008) and the Wharton Land Use Regulation index as detailed in Gyourko et al. (2008). While only a slight positive correlation is found between higher regulation and effect size, a stronger positive correlation is observed with housing supply elasticity. ...
... Effect size of the second iteration of the FHTC only. Housing supply elasticity estimates are taken from Saiz (2008). Land use regulation index taken from Gyourko et al. (2008). ...
Article
A major policy response to the 2008 housing crisis was the First-time Homebuyer Tax Credit, worth up to $8,000. To estimate the tax credit effects on homeownership, I construct a quarterly first-time homebuyer time-series using American Housing Survey data. Using both an event-study and a difference-in-difference framework, I estimate the tax credit induced 301,900 first-time homeowners and calculate the government paid $24,180 per additional homeowner. I find no evidence that first-time homebuyers bought more expensive houses or increased default rates. Estimating state and MSA-level effects I find a strong correlation between effect size and average home values, with a doubling in average home values implying a drop in effect size by 19.7 percentage points. These local effects also reveal larger effects in areas with smaller housing busts, had lower mortgage delinquency rates, and have higher housing supply elasticity.
... La réponse la plus souvent apportée sur l'opportunité d'une intervention publique, découle d'une transposition, que nous qualifierons de rapide, des relations théoriques entre offre et demande : la croissance observée des prix émane d'un déséquilibre offre/demande et les interventions souhaitables doivent se limiter à libérer l'offre. Cette « libération » de l'offre destinée à permettre aux marchés fonciers de retrouver des prix d'équilibre implique donc l'assouplissement des contraintes d'urbanisme et l'ouverture de nouvelles zones à la construction (POLLAKOWSKY et WACHTER, 1990 ;MALPEZZI, 1996 ;SAIZ, 2010b ;IHLANFELDT, 2007 ;CHESHIRE et SHEPPARD, 1989). Cette relation ne nous semble pas toujours résister à l'observation empirique. ...
... QUIGLEY et ROSENTHAL (2005) pour une revue internationale). De plus, une partie de la littérature analyse l'élasticité prix de l'offre de logement et considère que plus un système est restrictif, plus l'élasticité prix est faible (SAIZ, 2010b ;VERMEULEN et ROUWENDAL, 2007 ;MALPEZZI et MACLENNAN, 2001 ;TSE, 1998 ;BRAMLEY, 1993 ;MALPEZZI et al., 1985), c'est-à-dire que les hausses de prix ne permettent pas une réactivation de l'offre et un retour à l'équilibre. Toutefois, ces travaux s'appuient sur l'élasticité de l'offre par rapport aux prix et non pas sur l'offre foncière elle-même. ...
Article
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Does land use zoning policy increases land prices by reducing developable land supply? To answer this question, we propose an evaluation of the relationship between land supply and land prices in the French region Provence-Alpes-Côte-d’Azur. The developable land supply is identified through geomatics analyzes using new generation of spatial land use micro-data (digitalized cadastral map, land and owner characteristics, land use zoning policies). We use two alternative econometric evaluation methods to estimate the price effects of land supply : spatial hedonic model and quasi-natural experiments. We show that with both methodologies the estimated relationship is positive, Municipalities with higher corrected developable land supply exhibit higher land prices. The disequilibrium between supply and demand for developable land is so high in Provence-Alpes-Côte d’Azur that municipalities who increase the supply of land through new developable zones (without coordination with neighboring municipalities) face an increase of land prices.
... La réponse la plus souvent apportée sur l'opportunité d'une intervention publique, découle d'une transposition, que nous qualifierons de rapide, des relations théoriques entre offre et demande : la croissance observée des prix émane d'un déséquilibre offre/demande et les interventions souhaitables doivent se limiter à libérer l'offre. Cette "libération" de l'offre destinée à permettre aux marchés fonciers de retrouver des prix d'équilibre implique donc l'assouplissement des contraintes d'urbanisme et l'ouverture de nouvelles zones à la construction (POLLAKOWSKY, WACHTER, 1990 ;MALPEZZI, 1996 ;SAIZ, 2010b ;IHLANFELDT, 2007 ;CHESHIRE, SHEPPARD, 1989). Cette relation ne nous semble pas toujours résister à l'observation empirique. ...
... De nombreux auteurs ont montré que les rigidités introduites sur l'offre de logement conduisent à augmenter les prix (principalement États-Unis, au Royaume-Uni et en Asie ; GLAESER et al., 2005;QUIGLEY, RAPHAEL, 2005;MALPEZZI, 1996;CHESHIRE, SHEPPARD, 1989;HILBER, VERMEULEN, 2009) et que ces rigidités s'expriment à travers des zonages excluant les usages urbains ou des règles de densité de construction (voir QUIGLEY et ROSENTHAL (2005) pour une revue internationale). De plus, une partie de la littérature analyse l'élasticité prix de l'offre de logement et considère que plus un système est restrictif, plus l'élasticité prix est faible (SAIZ, 2010b ;VERMEULEN, ROUWENDAL, 2007;MALPEZZI, MACLENNAN, 2001;TSE, 1998 ;BRAMLEY, 1993 ;MALPEZZI et al., 1985) ; c'està-dire que les hausses de prix ne permettent pas une réactivation de l'offre et un retour à l'équilibre. Toutefois, ces travaux s'appuient sur l'élasticité de l'offre par rapport aux prix et non pas sur l'offre foncière elle-même. ...
Conference Paper
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Does land use zoning policy increases land prices by reducing developable land supply? To answer this question, we propose an evaluation of the relationship between land supply and land prices in the French region Provence-Alpes-Côte-d’Azur. The developable land supply is identified through geomatics analyzes using new generation of spatial land use micro-data (digitalized cadastral map, land and owner characteristics, land use zoning policies). We use two alternative econometric evaluation methods to estimate the price effects of land supply: spatial hedonic model and quasi-natural experiments. We show that with both methodologies the estimated relationship is positive, Municipalities with higher corrected developable land supply exhibit higher land prices. The disequilibrium between supply and demand for developable land is so high in Provence-Alpes-Côte d'Azur that municipalities who increase the supply of land through new developable zones (without coordination with neighboring municipalities) face an increase of land prices. La politique d’urbanisme fait-elle croître les prix fonciers par raréfaction de l’offre de terrains constructibles ? Pour répondre à cette question, nous proposons une évaluation des relations entre l’offre foncière et les prix fonciers sur 306 communes de la région Provence-Alpes- Côtes-d’Azur. L’offre foncière est estimée à partir de traitements géomatiques s’appuyant.sur la nouvelle génération de données spatiales issues du cadastre, de la propriété foncière et des zonages d’urbanisme. Pour évaluer les effets prix de l’offre foncière, nous utilisons deux méthodes d’évaluation économétrique alternatives: une approche hédonique à partir de modèles économétriques spatiaux et une approche causale à partir d’expériences quasi- naturelles. Nous montrons que dans les deux cas la relation est positive, c’est-à-dire que ce sont les communes avec les offres foncières les plus importantes, ou ayant le plus cru, qui voient les prix fonciers augmenter. Les résultats conduisent à montrer que le déséquilibre offre/demande en matière de foncier est tel en région Provence-Alpes-Côte d’Azur que des politiques municipales visant à accroître simplement les offres foncières par l’ouverture de zonage constructible de façon non coordonnée avec les autres communes conduit à l’inverse de l’objectif affiché de réduction des tensions foncières et de baisse des prix.
... ). However given the focus of this study is on housing supply in Sydney, the estimates by Green, Malpezzi and Mayo (2005) and Saiz (2008) for US cities provide a more useful benchmark. Green, Malpezzi and Mayo report estimates of the elasticity of housing supply for forty-five cities (strictly Metropolitan Statistical ...
... They find both higher population densities and more stringent regulatory environments are associated with lower supply elasticities. Broadly similar results are obtained by Saiz (2008) using a more structural econometric approach. Supply elasticities are reported for 95 US cities and range from about 0.6 to 5 – somewhat narrower than that found by Green, Malpezzi and Mayo. ...
Article
This article presents estimates of the supply elasticity for residential property in metropolitan Sydney over the period 1991–2006. Our results suggest that supply is inelastic—less than unity—for all types of housing, although the supply elasticity is relatively larger for strata properties (apartments and flats) than for non‐strata properties (separate and semi‐detached houses, terraces and townhouses). We also find evidence of a significant fall in supply elasticity between 1991–1996 and 2001–2006. When the median time taken by a local council to decide on a development application is included in the supply curve, it is found to have a negative effect on the supply of residential property. However, split‐sample estimates indicate this effect is largely confined to the 1991–1996 period.
... Second, we find that the extent of the convergence within the city (defined as the appreciation rate of lower priced neighborhoods relative to higher priced neighborhoods) is greater the larger the price appreciation rate for the city as a whole. For example, while low initially price neighborhoods appreciated at three times 1 Some notable exemptions include Topel and Rosen (1988), Case and Shiller (1989), Glaeser, Gyourko, and Saks (2005a), Glaeser and Gyourko (2006), Gyourko (2009), Kiyotaki, Michaelides, and Nikolov (2008) and Saiz (2009). In the Topel and Rosen, Glaeser, Gyourko, and Saks, Glaeser and Gyourko, and Gyourko papers, the dynamics are achieved -in part -by focusing on constraints to adjusting housing supply. ...
... 30 . In a recent paper, Saiz (2009) shows that water barriers and the steepness of land gradients, in addition to regulation, serve as binding barriers to the adjustment of housing supply. Gyourko (2009) provides a detailed survey of barriers to supply adjustment. ...
Article
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In this paper, we explore differential changes in house prices across neighborhoods within a city to better understand the nature of house price dynamics. Using a variety of different data sources, we find that two stable empirical relationships emerge. First, we find that initially low priced neighborhoods systematically experience higher appreciation rates during city wide housing booms than do initially higher priced neighborhoods. Second, we find that the extent of the convergence of prices across neighborhoods is greater the larger the price appreciation rate for the city as a whole. We then present a spatial equilibrium model of a city to explain the above facts. The key ingredient of our model is the presence of a positive neighborhood externality: agents like to live in areas where other agents live. The idea is that local amenities are better the more people live in the neighborhood. We show that if a positive house demand shock hits the city, house prices will appreciate more in low priced neighborhoods relative to high priced neighborhoods, as our first fact predicts. In addition, relative to a standard model with convex adjustment costs, the existence of a positive neighborhood externality generates a persistent increase in housing prices in the long run and may amplify the reaction of prices in the short run. We also show that our model is consistent with the second fact. In particular, we explore an extension of the model with gentrification. We show that cities at a more advanced stage of development feature more gentrification in reaction to similar demand shocks, hence experiencing bigger housing price booms and more neighborhood convergence. In the final part of the paper, we provide additional empirical support for the model's prediction.
... Feng, Hardin, and Wu (2019), Ghosh and Petrova (2017), and Holtermans and Kok (2019) show that occupancy rates of properties are positively related to rents. Lastly, Beracha and Skiba (2013), Glaeser, Gyourko, and Saiz (2008), Gyourko, Hartley, and Krimmel (2021), Saiz (2008), and many others suggest that land supply elasticity is one of the critical factors explaining property prices. ...
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We investigate the relation between commercial real estate (CRE) returns and regional innovativeness and find that regions with more innovation exhibit higher total returns on commercial property. And, when we investigate the extent to which income return and capital return on commercial properties are related to local innovativeness, we report a positive relation between innovativeness and income return but little to no association between innovativeness and capital return. Our paper also provides some initial evidence, suggesting that local innovativeness is related to better future CRE performance. Overall, this paper suggests that innovativeness of a region is economically and statistically positively related to CRE returns, adding to a budding literature investigating CRE returns, as well as a large literature researching innovation. JEL Classification: R11, R33, O30
... We also examine differences over time and across types of MSAs. & Quigley 2006;Johnes & Hyclak 1999;Munch, Rosholm, & Svarer 2008;Partridge et al. 2009Partridge et al. , 2010Reed & Ume 2016;Saiz 2008;Winkler 2013;Winters 2009;Zabel 2012). A strand of this literature focuses on the effects of housing market shocks on labor market outcomes. ...
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This study examines whether effects of labor demand shocks on housing prices vary across time and space. Using data on 321 U.S. metropolitan statistical areas (MSAs), the authors estimate the medium- and long-run effects of increases in MSA-level employment and total labor income on housing prices. Instrumental variable estimates for different time periods, and also for coastal, noncoastal, large, and small metropolitan statistical areas, are obtained using the shift-share instrument. Results suggest that labor demand shocks have positive effects on housing prices; however, these effects appear to vary across time periods and across different types of MSAs.
... Mainly due to housing, immigrants are often priced out of the most economically thriving neighborhoods within a metropolitan area(Saiz, 2008). For this reason, analyses at, for example, the census tract level may produce quite different results from those at the Metropolitan Statistical Area (MSA) or state level. ...
Book
The Economic and Fiscal Consequences of Immigration finds that the long-term impact of immigration on the wages and employment of native-born workers overall is very small, and that any negative impacts are most likely to be found for prior immigrants or native-born high school dropouts. First-generation immigrants are more costly to governments than are the native-born, but the second generation are among the strongest fiscal and economic contributors in the U.S. This report concludes that immigration has an overall positive impact on long-run economic growth in the U.S. More than 40 million people living in the United States were born in other countries, and almost an equal number have at least one foreign-born parent. Together, the first generation (foreign-born) and second generation (children of the foreign-born) comprise almost one in four Americans. It comes as little surprise, then, that many U.S. Residents view immigration as a major policy issue facing the nation. Not only does immigration affect the environment in which everyone lives, learns, and works, but it also interacts with nearly every policy area of concern, from jobs and the economy, education, and health care, to federal, state, and local government budgets. The changing patterns of immigration and the evolving consequences for American society, institutions, and the economy continue to fuel public policy debate that plays out at the national, state, and local levels. The Economic and Fiscal Consequences of Immigration assesses the impact of dynamic immigration processes on economic and fiscal outcomes for the United States, a major destination of world population movements. This report will be a fundamental resource for policy makers and law makers at the federal, state, and local levels but extends to the general public, nongovernmental organizations, the business community, educational institutions, and the research community. © 2017 by the National Academy of Sciences. All rights reserved.
... Data on each metropolitan area's population are obtained from the U. S. Census using actual and estimated population numbers for the examined time period. 15 Land supply elasticity (LSE), a variable that measures the availability of land for development, in each of the markets explored is obtained from Saiz (2008). 16 Saiz argues that limitations in developable land impact real estate activity and creates a measure of land available for development. ...
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Market segmentation for hotel properties is quantitatively assessed. Results indicate that the hotel property market is segmented by hotel class. The results are robust to model specification including general economic conditions, property performance measured by market level RevPAR, ADR, standard deviation in ADR, occupancy and standard deviation in occupancy and room count. The results strongly suggest segmented hotel property markets. By showing that hotel properties are not drawn from a single property population, the results advance the notion that aggregate property type pricing models may provide biased estimators.
... However, land use regulations are often criticized for their bullish effect on land and housing prices and consequently for their negative impact on access to housing (Jaeger andPlatinga, 2007, Ihlanfeldt, 2007;Glaeser and Gyourko, 2006;Saiz, 2010;Malpezzi, 1996;Pollakowsky and Wachter, 1990;Cheshire and Sheppard, 1989). Thus, McMillen and McDonald (2002) in Chicago, Tse (2001) in Hong Kong or Lecat (2006) in France observed higher prices where a zoning regulation is implemented. ...
... If supply were perfectly elastic, prices should not change at all. The measure of supply elasticity used (typically from Saiz, 2010) is based on fixed geographic factors such as the amount of water and the slopes of land plots in the market area, so it provides plausibly exogenous variation in real estate values due to changes in demand. Using this type of instrumental variables estimator, Chaney et al. (2012) and Cvijanovic (2014) recently report economically large collateral channel effects on investment among U.S. corporations. ...
... In a model that is calibrated according to empirical estimates of parameters such as the substitutability of labor, land, and capital in production, the estimate of ε Q is 1.90. Saiz (2008) has estimated local housing supply elasticities for 95 metropolitan areas in the U.S. The median estimated elasticity is 1.34 and the maximum is 5.16. In addition, in a medium run climate change scenario, worsening areas may only depopulate slowly as the supply of housing diminishes slowly over time due to depreciation, consistent with a small downside supply elasticity (Glaeser and Gyourko 2005). ...
Article
This paper uses hedonic methods and variation in wages and housing costs to estimate households' valuation of climate amenities. We find that, on the margin, household are willing to pay more to reduce extreme heat than to reduce extreme cold. Combining these estimates with climate forecasts for the United States, we find that an 8.3°F increase in the average U.S. temperature will result in welfare losses in most areas south of Chicago. On average, the cost of hotter summers exceeds the gain from warmer winters by 2 to 3 percent of income per year. These results account for taste heterogeneity and sorting; moreover, they are not substantially attenuated by allowing for migration.
... In a model that is calibrated according to empirical estimates of parameters such as the substitutability of labor, land, and capital in production, the estimate of ε Q is 1.90. Saiz (2008) has estimated local housing supply elasticities for 95 metropolitan areas in the U.S. The median estimated elasticity is 1.34 and the maximum is 5.16. In addition, in a medium run climate change scenario, worsening areas may only depopulate slowly as the supply of housing diminishes slowly over time due to depreciation, consistent with a small downside supply elasticity (Glaeser and Gyourko 2005). ...
Article
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This paper uses hedonic methods and variation in wages and housing costs to estimate households' valuation of climate amenities. We find that, on the margin, households are willing to pay more to reduce extreme heat than to reduce extreme cold. Combining these estimates with "business as usual" climate forecasts for the United States, we find welfare losses in most areas by 2100, with particularly large effects in California, southern states, and urban centers. On average, the cost of hotter summers exceeds the gain from warmer winters by 2 to 3 percent of income per year. These results account for taste heterogeneity and sorting; moreover, they are not substantially attenuated by allowing for migration.
... These variables will be used in our regressions to hold constant conventional determinants of housing demand. In addition, our regressions will also control for observable MSA heterogeneity in the supply of housing, with the index of supply elasticity compiled by Saiz (2010). The noteworthy feature of this index is that it does not depend on local market conditions but only on geographical and topographical constraints on house construction. ...
Article
We use a user-cost model to study how dispersed information among housing market participants aects the equilibrium house price. In the model, agents consume housing services, speculate on price changes and are disparately informed about local economic conditions. Information dispersion leads agent to form heterogeneous expectations about housing demand and prices. Optimists, who expect high house price growth, buy in antici- pation of capital gains, while pessimists prefer to rent housing units to avoid capital losses. The upshot is that pessimistic expectations are not incorporated in the price of owned houses and, thus, the equilibrium price is higher relative to the benchmark case of common information. We test the predictions of the model on US cities, using the dispersion of city income as a proxy for the dispersion of information of local economic condition. The empirical evidence supports the prediction that house prices are higher and more volatile in cities where information is more dispersed.
... In a nation of 300 million people, not all of us can afford to or want to live in these Superstar Cities. Limits to housing supply in these cities both due to man made regulations (Glaeser, Gyourko and Saks 2005) and due to mountains (see Saiz 2009) raise the cost of new construction. In the "Superstar Cities" of Los Angeles, New York City, San Francisco and Boston, an inelastic supply of housing combines with rising demand (due to the skewing of the nation's income distribution) to lead to very high home prices (Gyourko, Mayer and Sinai 2006). ...
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This paper surveys economic research on the association between economic development and urban areas, links this summary to some important trends in economic outcomes in Appalachia in recent decades, highlights areas in need of future research on the role of urban areas as engines of economic development in Appalachia, and discusses what types of place-based policies might be effective to promote economic growth and development in the Appalachian region.
... Examples are intense regulation, as described by, e.g. Glaeser et al. (2005) and Green et al. (2005); natural impediments to growth (Kolko (2008) and Saiz (2008)); liberal residents (Kahn (2007)); and reliance on multifamily housing combined with changes in federal tax policy (Davidoff (2008)). It has been difficult to disentangle the role of these different factors, because all of them are highly correlated. ...
Article
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This paper offers a simple explanation for differences in home price growth across metropolitan areas over the past three decades. Supply is least elastic, and appreciation potentially greatest, in metropolitan areas where available land is in worse locations than existing housing. Across US metropolitan areas, home price appreciation over the last thirty years is highly correlated with the within-metropolitan relationship between age of housing stock and land rents as measured by hotel prices. 1
... Several authors have recently put forth competing explanations for the effective inelasticity of coastal supply. Examples are intense regulation, as described by, e.g. and Green et al. (2005); natural impediments to growth (Kolko (2008) and Saiz (2008)); residents' characteristics (Kahn (2007)); and reliance on multifamily housing combined with changes in federal tax policy (Davidoff (2008)). It has been difficult to disentangle the roles of these different factors, because these characteristics are all highly correlated. ...
Article
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This paper offers a simple explanation for differences in home price growth across metropolitan areas over the past three decades. Supply is least elastic, and price appreciation potentially greatest, in metropolitan areas where available land is in worse locations than existing housing. Across US metropolitan areas, home price appreciation between 1980 and 2008 is highly correlated with the within-metropolitan relationship between age of housing stock and land rents, as measured by either hotel room prices in 2008 or apartment rents in 1980. The relationship between this land rent gradient and home price appreciation is stronger where predicted employment growth based on 1980 SIC code shares is greater.
... This muted price response also makes it likely that the bubble will be shorter in duration. They test these predictions using the proxy for housing supply elasticity developed in Saiz (2008). 2 2 This proxy is the percent of land within a 50 kilometer radius area that has a slope of less than 15 degrees. ...
... Following Himmelberg et al. (2005), we instrument local real estate prices using the interaction of long-term interest rates and local housing supply elasticity. Local housing supply elasticities are provided by Saiz (2009) and are available for 95 MSAs. These elasticities capture the amount of developable land in each metro area and are estimated by processing satellite-generated data on elevation and presence of water bodies. ...
Article
What is the impact of real estate prices on corporate investment? In the presence of financing frictions, firms use pledgeable assets as collateral to finance new projects. Through this collateral channel, shocks to the value of real estate can have a large impact on aggregate investment. Over the 1993-2007 period, the representative U.S. corporation borrows 4 cents of new debt, and invests 6 cents out of each additional dollar of collateral. To compute this sensitivity, we use local variations in real estate prices as shocks to the collateral value of firms that own real estate. We address the endogeneity of local real estate prices using the interaction of interest rates and local constraints on land supply as an instrument. We address the endogeneity of the decision to own land (1) by controlling for observable determinants of ownership and (2) by looking at the investment behavior of firms before and after they acquire land. The sensitivity of investment to collateral value is stronger the more likely a firm is to be credit constrained.
... We need to hold constant the supply of houses in equation (2). We do so thanks to the index of topographic constructability put together by Saiz (2008), which we denote by S c . The variable is e¤ectively observed at the MSA level, so we actually assume the topography is the same across the counties that form the Metropolitan Areas Saiz considers. ...
Article
We show that since 1994, branching deregulations in the U.S have significantly affected the supply of mortgage credit, and ultimately house prices. With deregulation, the number and volume of originated mortgage loans increase, while denial rates fall. But the deregulation has no effect on a placebo sample, formed of independent mortgage companies that should not be affected by the regulatory change. This sharpens the causal interpretation of our results. Deregulation boosts the supply of mortgage credit, which has significant end effects on house prices. We find evidence house prices rise with branching deregulation, particularly so in Metropolitan Areas where construction is inelastic for topographic reasons. There is also evidence the fall in house prices after 2006 is most pronounced in least regulated states. We document these results in a large sample of counties across the U.S. We also focus on a reduced cross-section formed by counties on each side of a state border, where a regression discontinuity approach is possible. Our conclusions are strengthened.
... The literature provides a variety of measurements for housing supply elasticity, such as the geographical constraint measure developed by Saiz (2010), the Wharton Residential Land Use Regulatory Index from Gyourko, Saiz and Notes: This table reports contemporaneous panel regressions of the log difference of GMP (gmp i,t ) on the log difference of house turnover (to i,t ) for MSAs with "tight" and "loose" housing markets, with the log difference of OFHEO house price index (hp i,t ) controlled. The markets with the lowest (highest) 20% of the long-term supply elasticity are "tight" ("loose") markets. ...
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If realized house prices have the wealth effect and the collateral effect on the economy, anticipated house price changes should have similar economic effects. This paper empirically analyzes the effects of single family home sales, which are shown to be able to predict house prices in the literature, on economic production, using 372 Metropolitan Statistic Areas in the U.S. from the first quarter of 1981 to the second quarter of 2008 in a panel Vector Error Correction Model. Changes in home sales are found to Granger cause the growth rate of per capita Gross Metropolitan Product, and the dynamic effects are visualized with impulse response functions. Supporting evidence for the economic impact of home sales is also found in contemporaneous regressions.
... However, if housing supply is relatively elastic, the increased demand is reflected in more units, with prices remaining relatively unchanged. The local elasticity of housing supply is currently an active research area, revealing a complex story involving topographical constraints, (endogenous) land use regulations (Saiz 2010) and an asymmetry between growing and declining markets (Glaeser, Gyourko and Saks 2006). Housing supply may be very price sensitive in some places and relatively insensitive in others, and we later use a measure of land regulation to control for varying supply elasticities across states. ...
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Property tax limitations, as well as other tax and expenditure restrictions on state and local governments in the United States, date back to the late 19th century. A surge in property tax limitation legislation occurred in the late 1970s and early 1980s, and its effects on government revenue, school financing and educational quality have been studied extensively. However, there is surprisingly little literature on how property tax limits affect housing markets. For the first time, we examine the impacts of property tax limitations on housing growth, in addition to their impacts on housing prices. Using state-level data over 23 years, we find that property tax limits increase housing prices (indexes) by approximately 2%. Property tax limits appear to have little impact on the growth in the housing stock, but education spending limits reduce the number of building permits by over 6%. Our indirect evidence suggests that the number of housing units may grow when property tax limits are accompanied by increases in other own-source revenues to state government.
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Local economy should be an important determinant of commercial real estate (CRE) performance. This paper empirically examines how the economic conditions of a metropolitan area drive the performance of CRE in the area. This paper shows that areas with better economic conditions provide a higher total return on commercial properties than those with worse economic conditions. Further analysis indicates that both the income return and capital appreciation of CRE are significantly affected by the size of the economy (proxied as GDP level), while the capital return (but not income return) is significantly affected by the growth of the economy (proxied as GDP growth). The results are largely consistent in the Fama–MacBeth regression, the portfolio analysis, and the propensity score matching model, providing solid evidence on the important effects of local economy on CRE.
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Searching for a property is inherently a multicriteria spatial decision. The decision is primarily based on three high-level criteria composed of household needs, building facilities, and location characteristics. Location choice is driven by diverse characteristics; including but not limited to environmental factors, access, services, and the socioeconomic status of a neighbourhood. This article aims to identify the gap between theory and practice in presenting information on location choice by using a gap analysis methodology through the development of a sevenfactor classification tool and an assessment of international property websites. Despite the availability of digital earth data, the results suggest that real-estate websites are poor at providing sufficient location information to support efficient spatial decision making. Based on a case study in Dublin, Ireland, we find that although neighbourhood digital earth data may be readily available to support decision making, the gap persists. We hypothesise that the reason is two-fold. Firstly, there is a technical challenge to transform location data into usable information. Secondly, the market may not wish to provide location information which can be perceived as negative. We conclude this article with a discussion of critical issues necessary for designing a spatial decision support system for real-estate decision making.
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Asset markets like stock markets are characterized by positive feedback through speculative demand. But the supply of housing is endogenous, and adds negative feedback to the housing market. We design an experimental housing market and study how the strength of the negative feedback, i.e., the price elasticity of supply, affects market stability. In the absence of endogenous housing supply, the experimental markets exhibit large bubbles and crashes because speculators coordinate on trend-following expectations. When the positive feedback through speculative demand is offset by the negative feedback of elastic housing supply the market stabilizes and prices converge to fundamental value. Individual expectations and aggregate market outcome are well described by the heuristics switching model. Our results suggest that negative feedback policies may stabilize speculative asset bubbles.
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Modern urban economic theory and policymakers are coming to see the provision of consumer‐leisure amenities as a way to attract population, especially the highly skilled and their employers. However, past studies have arguably only provided indirect evidence of the importance of leisure amenities for urban development. In this paper, we propose and validate the number of tourist trips and the number of crowdsourced picturesque locations as measures of consumer revealed preferences for local lifestyle amenities. Urban population growth in the 1990‐2010 period was about 10 percentage points (about one standard deviation) higher in a metro area that was perceived as twice more picturesque. This measure ties with low taxes as the most important predictor of urban population growth. “Beautiful cities” disproportionally attracted highly educated individuals and experienced faster housing price appreciation, especially in supply‐inelastic markets. In contrast to the generally declining trend of the American central city, neighborhoods that were close to central recreational districts have experienced economic growth, albeit at the cost of minority displacement. This article is protected by copyright. All rights reserved.
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The mortgage market has given rise to a changing and diverse set of borrowers actively using ARMs. Data from the Panel Study of Income Dynamics (PSID) for 2007 and 2013–2015 are used to study borrowing decisions. One view is that an ARM should be offered and taken by those better able to respond to an upward reset. Yet favorable economic conditions induce a demand for mortgages, including by higher risk borrowers, and for these households transactions occur at higher rates, often as ARMs, especially as of 2007. Panel analysis confirms some response to the spread but also to changing demand for mortgages in the shorter run. During the boom, the use of ARMs as a tool for ‘affordability’ led to actual transaction rates exceeding those for fixed rate mortgages. Analysis confirms substantial payment difficulties. Yet, analysis of mortgage transitions, 2007–13, establishes that the ‘affordability’ component to ARM, though less significant, still was present. ARMs were often taken by minorities and those with less education and with family income under $60,000 per year.
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Theory suggests that financing frictions can have significant implications for equity volatility by shaping firms’ exposure to economic risks. This paper provides evidence that an important determinant of higher equity volatility among R&D-intensive firms is fewer financing constraints on firms’ ability to access growth options. I provide evidence for this effect by studying how persistent shocks to the value of firms’ tangible assets (real estate) affect their subsequent equity volatility. The analysis addresses concerns about the identification of these balance sheet effects and shows that these effects are consistent with broader patterns on the equity volatility of R&D-intensive firms. This article is protected by copyright. All rights reserved
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This paper examines the influence of land supply on housing markets in urban China. The extent to which geographical and man-made land constraints influence housing prices and quantities is explored. Using a sample of 35 cities in China from 2003 to 2012, I find that cities with less naturally available land have experienced greater price appreciation and the quantity response is less in those places. The results imply that geography matters in Chinese housing markets where land is discretely allocated by the government. In cities where there is more land naturally available, the government may be less concerned about the loss of arable land and be more permissive with development. Moreover, my findings imply that the allocation of land use via government decision in China is quasi-exogenous to changes in housing price and quantity, suggesting that decisions by governments about land supply may not be dependent on housing prices.
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Purpose The purpose of this paper is to examine the role of monetary liquidity in house price evolution through examining the Asset (housing) Inflation channel. It identifies the main channels of transmission affecting house prices from monetary supply channels to house price change, examining how the Asset Price channel transmits changes in M1 to housing prices in Spain and the UK. Design/methodology/approach The paper uses Vector Auto Regression (VAR) and Error Correction models to test the Asset Inflation channel in the UK and Spain from 1991 to 2013 in two steps. In the first step, the supply elasticity is estimated through the long-term relationship between house prices and stock supply. The second step estimates a Vector Error Correction (VEC) to explain house price dynamics conditioned on supply reactions. The latter is defined as a long-term inverse demand model where housing prices are controlled by fundamentals in each market. Models allow forecast testing using Choleski impulse responses methodology. Findings Several results are found. In the supply model, both countries show rapid convergence to equilibrium with a larger elasticity of supply in Spain than in the UK but with a short run effect of new supply on prices in the UK. Regarding the Asset Inflation Channel model, the paper finds evidence of the existence of a housing accelerator effect in Spain, but not in the UK where changes in liquidity fully impact house prices in one direction. Research limitations/implications Implications of findings are mainly to forecast the effects of Monetary Policy measures in different economies. Practical implications The model supports the evaluation of different impacts of monetary policy in territories. It shows that the same policy will have different impacts in different housing markets and therefore highlights the importance of examining each market separately to identify the appropriate policy interventions. Originality/value This is the first paper that estimates the impact of the Asset Inflation Channel on house prices that endogenises housing market conditions and compares effects and interrelationships in two different economies.
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Italian and Spanish property markets have experienced a sustained period of growth since the mid-1990s until 2008 when both markets fell into rapid decline due to the worldwide Financial Economic Crisis (FEC). Although the economic impact of the FEC was similar, each country experienced different reactions in its respective real estate market, changes on house prices, building constructions or planning regulations. This paper presents a new supply equation for Italian and Spanish regional markets. A pool of EGLS/IV Two-Step GLS methods are used to account for cross-sectional heteroskedasticity with fixed effects in order to control space differences. The analysis has been developed at a regional level, and shows the variation in the responsiveness of the new housing supply to prices by region. The results show long-term price supply elasticity by regions, and the negative impact of exogenous shock. They also suggest that house markets follow similar patterns in several regions with elastics responses in most territories and stronger negative impact of credit crunch in Spanish than Italian housing development.
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There is a growing concern regarding housing supply management because of soaring housing prices consequent to recent market failure in China. This study is aimed at presenting an equilibrium-oriented housing supply management model that integrates housing supply and demand with time lag and reasonable vacancy area. For validity test of the model, Chengdu City was selected as a sample. The study establishes the feasibility of this model by demonstrating that optimized housing supply can narrow the gap between housing supply and demand. The implication of this finding is that planning of housing supply is an important management tool and that in applying this tool, local government should intervene in housing market to ensure scientific consideration of city's development position, economic growth and housing demand.
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This thesis studies the economics of local labor markets. There are three chapters in the thesis, and each chapter studies how economic outcomes are affected by local labor market conditions. The first chapter studies the incidence of local labor demand shocks. This chapter starts from the observation that low-skill workers are comparatively immobile. When labor demand slumps in a city, college-educated workers tend to relocate whereas non college workers are disproportionately likely to remain to face declining wages and employment. A standard explanation of these facts is that mobility is more costly for low-skill workers. This chapter proposes and tests an alternative explanation, which is that the incidence of adverse shocks is borne in large part by (falling) real estate rental prices and (rising) social transfers. These factors reduce the real cost of living differentially for low-income workers and thus compensate them, in part or in full, for declining labor demand. I develop a spatial equilibrium model which, appropriately parameterized, identifies both the magnitude of unobserved mobility costs by skill and the shape of the local housing supply curve. Nonlinear reduced form estimates using U.S. Census data document that positive labor demand shocks increase population more than negative shocks reduce population, that this asymmetry is larger for lows kill workers, and that such an asymmetry is absent for wages, housing values, and rental prices. Estimates of the full model using a nonlinear, simultaneous equations GMM estimator suggest that (1) the asymmetric population response is primarily accounted for by an asymmetric housing supply curve, (2) the differential migration response by skill is primarily accounted for by transfer payments, and (3) estimated mobility costs are at most modest and are comparable for high-skill and low-skill workers, suggesting that the primary explanation for the comparative immobility of low-skilled workers is not higher mobility costs per se, but rather a lower incidence of adverse labor demand shocks. The second chapter, written jointly with Daron Acemoglu and Amy Finkelstein, studies how local area health spending responds to permanent changes in local area income. This chapter is motivated by the fact that health expenditures as a share of GDP have more than tripled over the last half century, and a common conjecture is that this is primarily a consequence of rising real per capita income, which more than doubled over the same period. We investigate this hypothesis empirically by instrumenting for local area income with time-series variation in global oil prices between 1970 and 1990 interacted with cross-sectional variation in the oil reserves across different areas of the Southern United States. This strategy enables us to capture both the partial equilibrium and the local general equilibrium effects of an increase in income on health expenditures. Our central estimate is an income elasticity of 0.7, with an elasticity of 1.1 as the upper end of the 95 percent confidence interval. Point estimates from alternative specifications fall on both sides of our central estimate, but are almost always less than 1. We also present evidence suggesting that there are unlikely to be substantial national or global general equilibrium effects of rising income on health spending, for example through induced innovation. Our overall reading of the evidence is that rising income is unlikely to be a major driver of the rising health share of GDP. The third chapter, written jointly with Kory Kroft, studies theoretically and empirically how optimal Unemployment Insurance (UI) benefits vary with local labor market conditions. Theoretically, we derive the relationship between the moral hazard cost of UI and the unemployment rate in a standard search model. The model motivates our empirical strategy which tests whether the effect of UI benefits on unemployment durations varies with the local unemployment rate. In our preferred specification, a one standard deviation increase in the local unemployment rate reduces the magnitude of the duration elasticity by 32%. Using this estimate to calibrate the optimal level of UI benefits, we find that a one standard deviation increase in the unemployment rate leads to a 6.4 percentage point increase in the optimal replacement rate. JEL classification: J61, 110, J65.
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Purpose – The paper develops a housing model equation for Spain and selected regions to estimate new supply elasticity. The aim of the paper is to assess the role of housing supply on price evolution and explain the fall in housing starts since the start of the credit crunch. Design/methodology/approach – The paper uses a pooled EGLS specification controlling for the presence of cross-section heteroskedasticity. Fixed effect estimators are calculated to capture regional heterogeneity. The model uses secondary data (quarterly) for 17 Spanish regions over the period 1990-2012. A recursive procedure is applied to estimate model parameters starting with a baseline model (1990-1999) and successively adding one-year time information. Elasticities, as well as explanatory power from models, are reported and jointly analyzed. Elasticity is interpreted as the extent to which market mechanisms drive developer responses. Findings – Elasticities of new supply are shown to be very stable during all periods but characterized by differences in response at a regional level. Elasticity ranges from 0.8 to 1.3 across regions. The model reports a non-market-oriented mechanism that guides building decisions. The credit crunch and debt crisis have had a double negative effect capturing the cumulative effect of exogenous shocks. Research limitations/implications – Elastic responses restrained the effects of over-pricing in the period of strong demand pressures in the early 2000s. Changes in elasticity parameters over time suggest that long-term elasticity in housing supply depends on the specific region analyzed. The results show that the credit crunch shock had varying degrees of severity in Spanish regions, dramatically reducing house-building because of the high sensitivity to changes in prices. Practical implications – Estimated elasticity may be used to forecast responses to changes in housing prices. The results add to the understanding of the equilibrium mechanism in the housing market across regions. Originality/value – This is the first article that analyses housing supply, calculates supply elasticities and measures the impact of the credit crunch on the housing market from the supply side in Spain. The paper adds evidence to the debate concerning the equilibrium mechanism in the housing market.
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We estimate the effect of land use regulation on the value of land by exploiting variation in regulation and land values across municipal borders. Since the value of land gives us the market's measure of the attract-iveness of a location, our estimates allow us to draw conclusions about the effect of land use regulation on welfare. Reductions to an aggregate measure of regulatory intensity are welfare improving. Looking at a more detailed description of regulation we find that complexity of the planning process and a planning process subject to political manipulation are most likely to lower welfare. Regulation that requires minimum lot sizes for residential development increases land values.
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This project investigates how changes in Metropolitan Statistical Area (MSA)- level housing prices affect household fertility decisions. Recognizing that housing is a major cost associated with child rearing, and assuming that children are normal goods, we hypothesize that an increase in real estate prices will have a negative price effect on current period fertility. This applies to both potential first-time homeowners and current homeowners who might upgrade to a bigger house with the addition of a child. On the other hand, for current homeowners, an increase in MSA-level house prices will increase home equity, leading to a positive effect on birth rates. Controlling for MSA fixed effects, trends, and time-varying conditions, our analysis finds that indeed, short-term increases in house prices lead to a decline in births among non-owners and a net increase among owners. Our estimates suggest that a $10,000 increase in house prices leads to a 2.1 percent increase in births among home owners, and a 0.4 percent decrease among non-owners. At the mean U.S. home ownership rate, our estimates imply that the net effect of a $10,000 increase in house prices is a 0.8 percent increase in births. Given underlying differences in home ownership rates, the predicted net effect of house price changes varies across demographic groups. Our paper provides evidence that homeowners use some of their increased housing wealth, coming from increases in local area house prices, to fund their childbearing goals. In addition, we find that changes in house prices exert a larger effect on current period birth rates than do changes in unemployment rates.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
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The prioritized cash flow rules that govern structured finance essentially guarantee that senior tranches will only default in the worst states of the world. In this paper we present empirical evidence which suggests that the impact of economic catastrophe on a structured finance instrument also depends critically on the degree of correlation in the underlying collateral generating the cashflows. Subprime mortgage-backed securities with highly geographically concentrated mortgage collateral (our proxy for correlation) experienced substantially higher deal-level default rates and more significant credit rating downgrades during the financial crisis. Not all deals had geographically concentrated collateral. In fact, we document considerable cross-sectional variation. Collateral concentration did not appear to be priced in the subprime bond market.
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EXECUTIVE SUMMARY Land use regulation of residential housing is ubiquitous across the Philadelphia metropolitan area, as it is across the nation. How ubiquitous? What characteristics of the municipality are systematically associated with the degree of regulatory control? And, what are the implications of the findings? In order to obtain the detailed regulation data needed to address these questions, the Zell/Lurie Real Estate Center at the Wharton School of the University of Pennsylvania embarked on a national and regional survey of residential land use regulations. (The research work on the Philadelphia region was supported by the William Penn Foundation.) Using these data we created the Wharton Residential Land Use Regulation Index (WRLURI), an aggregate index designed to measure the degree of residential land use control in each jurisdiction. What did we learn about regulation in the Philadelphia region? Prevalence of Regulations. There are several particularly interesting results: (1)Formal approval of projects, even when proper zoning is in place, is required in virtually all communities; over 60% require two or more approvals. (2) Annual limits on permits were used by only 13 communities. (3) 91% control density with some type of minimum lot size restraint. (4) A third had affordable housing requirements (mostly on the New Jersey side); two-thirds had open space and infrastructure cost requirements. (5) Over 57% experienced lot development cost increases over the past decade in excess of general inflation, with 11% having a doubling or more. (6) Review times in the region are almost double those of the average for the rest of the nation.
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Is the 2007-2008 U.S. sub-prime mortgage financial crisis truly a new and different phenomena? Our examination of the longer historical record finds stunning qualitative and quantitative parallels to 18 earlier post-war banking crises in industrialized countries. Specifically, the run-up in U.S. equity and housing prices (which, for countries experiencing large capital inflows, stands out as the best leading indicator in the financial crisis literature) closely tracks the average of the earlier crises. Another important parallel is the inverted v-shape curve for output growth the U.S. experienced as its economy slowed in the eve of the crisis. Among other indicators, the run-up in U.S. public debt and is actually somewhat below the average of other episodes, and its pre-crisis inflation level is also lower. On the other hand, the United States current account deficit trajectory is worse than average. A critical question is whether the U.S. crisis will prove similar to the most severe industrialized-country crises, in which case growth may fall significantly below trend for an extended period. Or will it prove like one of the milder episodes, where the recovery is relatively fast? Much will depend on how large the shock to the financial system proves to be and, to a lesser extent, on the efficacy of the subsequent policy response.
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Differences in local fiscal conditions generate compensating differentials across local land and labor markets just as the authors have known amenities to do. Thus, the local fiscal climate affects the quality of life across metropolitan areas. The authors present new results showing that intercity fiscal differentials are nearly as important as amenity differentials in determining the quality of life across urban areas. The paper also investigates the sensitivity of the quality-of-life rankings with respect to assumptions about the nature of the marginal entrant. The authors estimate a random effects model to account for city-specific error components in the housing and wage regressions. Copyright 1991 by University of Chicago Press.
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The responses from a nationwide survey of residential land use regulation in over 2,600 communities across the U.S. are used to develop a series of indexes that capture the stringency of local regulatory environments. Factor analysis is used to combine the component indexes into a single, aggregate measure of regulatory constraint on development that allows us to rank areas by the degree of control over the residential land use environment. We call this measure the Wharton Residential Land Use Regulation Index (WRLURI). Key stylized facts arising from the data include that there is a strong positive correlation across the subcomponents that make up our regulation index. Practically speaking, this means that highly (lightly) regulated places tend to be highly (lightly) regulated on virtually all the dimensions by which we measure regulatory stringency. The stringency of regulation also is strongly positively correlated with measures of community wealth, so that it is the richer and more highly-educated places that have the most highly regulated land use environments. However, the stringency of regulation is weakly negatively correlated with population density. The fact that the densest communities are not the most highly regulated strongly suggests that the motivation for land use controls is not a fundamental scarcity in the sense that these places are 'running out of land'.
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Housing prices vary widely from market to market in the United States. The purpose of this study is to (1) construct new place-to-place indexes of the price of housing, using the 1990 Census, and (2) analyze the determinants of housing prices, with a particular focus on the supply side determinants—regulatory and natural constraint—as well as the usual demand determinants.
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This paper estimates the direct and spillover effects of zoning controls along with other growth restrictions on housing prices. Theory leads us to expect a positive effect of land-use restrictions on the price of developed land and a negative effect on the price of undeveloped land. We consider the effects on housing prices, and hence the effects on developed land. Other studies have examined the impact of separate components of land-use controls within a locality. We show that specific growth controls must be examined in the overall context of local land-use policy, and that interjurisdictional as well as intrajurisdictionael effects must be considered.
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Environmental regulation in the United States has increased pollution abatement expenditure as a percentage of gross national product from 1.7 percent in 1972 to an estimated 2.6 percent in the year 2000. This rise in regulation has coincided with demographic and economic changes that include rising educational levels, a growing minority population, an aging population, and decreasing employment in polluting industries. This paper examines whether these trends have contributed to increasing aggregate demand for environmental regulation. New evidence on voting on environmental ballots in California, local government environmental expenditures across the United States, and 25 years of congressional voting on environmental issues is examined to document the demographic correlates of environmental support. Minorities and the more educated are more pro-green, whereas manufacturing workers oppose environmental regulation. While demographics help explain observed differences in environmental support and thus can help predict long trends in the “average voter's” environmentalism, environmentalism varies substantially year to year unrelated to population demographics. © 2002 by the Association for Public Policy Analysis and Management.
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This paper develops and applies a method for measuring the extent to which large bodies of water restrict urban land supply. The amount of land available for urban use is the sum of weighted annular areas, net of water, around the urban center. The weights exponentially decrease toward zero with distance from the center at a rate determined by the population density gradient. The method of measurement and the weights are derived from the theory of a monocentric city with a perfectly competitive land market. The method is applied to calculate land supply indexes for the 40 most populous U.S. urban areas in 1980, and indexes over time for two land-filled urban areas. Such indexes can be constructed to account for restrictions imposed by mountains and by zoning. They are useful in empirical studies of land, housing, transportation, and population density.
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A growing belief exists that social capital contributes to economic growth of communities. In this paper, we identify inputs into the production of social capital at the level of US counties, using an array of individual and community factors that are theoretically important determinants of social capital. We use data from the Bureau of the Census, County Business Patterns, USA Counties on CD, National Center for Charitable Statistics, and the Regional Economic Information System for two time periods. Ethnic homogeneity, income inequality, attachment to place, education, age, and female labor force participation are strongly associated with levels of social capital across US counties.
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We analyze the effects of supply constraints on housing prices. For plausible parameterizations, loosening regulatory constraints in individual jurisdictions would have little effect on prices, while coordinated loosening across markets could have large price effects.
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Is there a local economic impact of immigration? Immigration pushes up rents and housing values in US destination cities. The positive association of rent growth and immigrant inflows is pervasive in time series for all metropolitan areas. I use instrumental variables based on a “shift-share” of national levels of immigration into metropolitan areas. An immigration inflow equal to 1% of a city's population is associated with increases in average rents and housing values of about 1%. The results suggest an economic impact that is an order of magnitude bigger than that found in labor markets.
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Combining data from several sources, we build a database of home values, the cost of housing structures, and residential land values for 46 large US metropolitan areas from 1984 to 2004. Our analysis of these new data reveal that since the mid-1980s residential land values have appreciated over a much wider range of cities than is commonly believed. And, since 1998, almost all large US cities have seen significant increases in real residential land prices. Averaging across the cities in our sample, by year-end 2004, the value of residential land accounted for about 50 percent of the total market value of housing, up from 32 percent in 1984. An implication of our results is that housing is much more land intensive than it used to be, meaning that the future course of home prices—the average rate of appreciation and volatility—is likely to be determined even more by demand factors than was the case even ten or twenty years ago.
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This paper uses several California data sets to test for differences in consumption patterns between greens and browns. A person's “environmentalism” is rarely observed in consumer data sets. In California, a community's share of Green Party registered voters is a viable proxy for community environmentalism. Environmentalists are more likely to commute by public transit, purchase hybrid vehicles, and consume less gasoline than non-environmentalists.
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This paper provides an analysis of the supply-restriction model of growth controls. Growth controls in such a model harm consumers while enriching landowners, and they will only be adopted if landowners have political power. In the model, this power is manifested in the city government's use of a social welfare that takes both landlord and consumer welfare into account. Since cities cannot be small if the supply restriction inherent in growth controls is to have an impact, strategic interactions must be considered in the analysis of city choices. A general model is presented, and an extended example based on Leontief preferences is then considered. Comparative-static analysis of Nash equilibria in the Leontief case shows that perturbations of preferences or other characteristics of a single city can have important spillover effects that alter the choices of all cities in the region.
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Effective governance of residential development and housing markets poses difficult challenges for land regulators. In theory, excessive land restrictions limit the buildable supply, tilting construction toward lower densities and larger, more expensive homes. Often, local prerogative and regional need conflict, and policymakers must make tradeoffs carefully. When higher income incumbents control the political processes by which local planning and zoning decisions are made, regions can become less affordable as prices increase. Housing assistance programs meant to benefit lower income households could be frustrated by limits on density and other restrictions on the number and size of new units. The empirical literature on the effects of regulation on housing prices varies widely in quality of research method and strength of result. A number of credible papers seem to bear out theoretical expectations. When local regulators effectively withdraw land from buildable supplies-whether under the rubric of "zoning," "growth management," or other regulation-the land factor and the finished product can become pricier. Caps on development, restrictive zoning limits on allowable densities, urban growth boundaries, and long permit-processing delays have all been associated with increased housing prices. The literature fails, however, to establish a strong, direct causal effect, if only because variations in both observed regulation and methodological precision frustrate sweeping generalizations. A substantial number of land use and growth control studies show little or no effect on price, implying that sometimes, local regulation is symbolic, ineffectual, or only weakly enforced. The literature as a whole also fails to address key empirical challenges. First, most studies ignore the "endogeneity" of regulation and price (for example, a statistical association may show regulatory effect or may just show that wealthier, more expensive communities hav
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In this paper, we develop a specific observable symptom of a banking system that underprices the default spread in non-recourse asset-backed lending. Using three different data sets for 18 countries and property types, we find that, following a negative demand shock, the “underpricing” economies experience far deeper asset market crashes than economies in which the put option is correctly priced. Furthermore, only one of the countries in our sample continues to exhibit the underpricing symptom following a market crash. This indicates that market crashes have a cleansing effect and eliminate underpricing at least for a period of time. This makes investing in such markets safer following a negative demand shock.
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This study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities. The theory demonstrates that if the amenity is also productive, then the sign of the wage gradient is unclear while the rent gradient is positive. The theory is extended to include the housing market and nontraded goods. These extensions require little modification of the conclusion. The empirical work on wages shows that the regional wage differences can be explained largely by these local attributes. With the use of site price data, implicit prices are estimated and quality of life rankings for the cities are computed.
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This study exploits the quasi-random assignment of air pollution changes across counties induced by federally mandated air pollution regulations to identify the impact of particulate matter on property values. Two striking empirical regularities emerge from the analysis. First particulate matter declined substantially more in regulated than in unregulated counties during the 1970s and 1980s. At the same time, housing prices rose more in regulated counties. The evidence suggests that this approach identifies two causal effects: 1) the impact of regulation on air quality improvements, and 2) the impact of regulation on economic gains for home-owners. In addition, the results highlight the importance of choosing regulatory instruments that are orthogonal to unobserved housing price shocks that vary by county over long time horizons. It appears that using regulation-induced changes in particulate matter leads to more reliable estimates of the capitalization of air quality into property values. Whereas the conventional cross-sectional and unstable and indeterminate across specifications, the instrumental variables estimates are much larger, insensitive to specification of the model, and appear to purge the biases in the conventional estimates. The estimates imply that a one-unit reduction in suspended particulates results in a 0.7-1.5 percent increase in home values. In addition, it appears that air pollution regulations resulted in real economic benefits to home-owners in regulated counties.
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No abstract provided. Economics Version of Record
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This paper studies the response of housing markets to immigration shocks. Following Card (1990), I examine the changes in rental prices in Miami and three comparison groups after the Mariel boatlift. This exogenous immigration shock added an extra 9% to Miami's renter population in 1980. I find that rents increased from 8% to 11% more in Miami than in the comparison groups between 1979 and 1981. By 1983 the rent differential was still 7%. Rental units of higher quality were not affected by the immigration shock. Units occupied by low-income Hispanic residents in 1979 experienced an extra 8% differential hike with respect to other low-income units. Relative housing prices moved in the opposite direction from rents in the short run. Copyright (c) 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation. This paper presents an asset-market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock. Simulation results suggest that the accelerating inflation of the 1970s, which substantially reduced homeowners' user costs, could have accounted for as much as a 30 percent increase in real house prices. Persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner-occupied housing.
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Many households devote a large fraction of their budgets to “consumption commitments”—goods that involve transaction costs and are infrequently adjusted. This paper characterizes risk preferences in an expected utility model with commitments. We show that commitments affect risk preferences in two ways: (1) they amplify risk aversion with respect to moderate-stake shocks, and (2) they create a motive to take large-payoff gambles. The model thus helps resolve two basic puzzles in expected utility theory: the discrepancy between moderate-stake and large-stake risk aversion and lottery playing by insurance buyers. We discuss applications of the model such as the optimal design of social insurance and tax policies, added worker effects in labor supply, and portfolio choice. Using event studies of unemployment shocks, we document evidence consistent with the consumption adjustment patterns implied by the model.
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This paper asks how a household should choose between a fixed-rate (FRM) and an adjustable-rate (ARM) mortgage. In an environment with uncertain inflation a nominal FRM has a risky real capital value, whereas an ARM has a stable real capital value but short-term variability in required real payments. Numerical solution of a life-cycle model with borrowing constraints and income risk shows that an ARM is generally attractive, but less so for a risk-averse household with a large mortgage, risky income, high default cost, or low moving probability. An inflation-indexed FRM can improve substantially on standard nominal mortgages. © 2001 the President and Fellows of Harvard College and the Massachusetts Institute of Technology
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The evaluation of numerous school reforms requires an understanding of the value of better schools. Given the difficulty of calculating the relationship between school quality and student outcomes, I turn to another method and use house prices to infer the value parents place on school quality. I look within school districts at houses located on attendance district boundaries; houses then differ only by the elementary school the child attends. I thereby effectively remove the variation in neighborhoods, taxes, and school spending. I find that parents are willing to pay 2.5 percent more for a 5 percent increase in test scores. This finding is robust to a number of sensitivity checks.
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Housing prices vary widely between U.S. markets. The purpose of this study is to analyze determinants of housing prices, with particular focus on the effects of regulations in land and housing markets. The basic unit of observation is the city or metropolitan area. The innovative part of the data collection is constructing indexes that reflect regulatory regimes in different markets. The basic method is to model house prices and rents in a simple supply and demand framework focusing on incomes, population changes, "noneconomic" determinants (such as topographical features), and other supply conditions, notably measures of the regulatory environment.
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Differences in the supply of housing generate substantial variation in house prices across the United States. Because house prices influence migration, the elasticity of housing supply also has an important impact on local labor markets. I assemble evidence on housing supply regulations and examine their effect on metropolitan area housing and labor market dynamics. Locations with relatively few barriers to construction experience more residential construction and smaller increases in house prices in response to an increase in housing demand. Furthermore, housing supply constraints alter local employment and wage dynamics in locations where the degree of regulation is most severe.
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The internet and other large textual databases contain billions of documents: is there useful information in the number of documents written about different topics? We propose, based on the premise that the occurrence of a phenomenon increases the likelihood that people write about it, that the relative frequency of documents discussing a phenomenon can be used to proxy for the corresponding occurrence-frequency. After establishing the conditions under which such proxying is likely to be successful, we construct proxies for a number of demographic variables in the US and for corruption across countries and US states and cities, obtaining average correlations with occurrence-frequencies of 0.47 and 0.61 respectively. We also replicate results from two separate published papers establishing the correlates of corruption at both the state and country level. Finally, we construct the first index of corruption in US cities and study its correlates.
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The study analyzes the effect of restrictive building codes on the price of housing, and the simultaneous impact of housing values on the strictness of codes. A model is defined and estimated, using data for more than 1100 localities. The results show that strict codes raised housing values, in 1970, by about one thousand dollars. They furthermore show that the strictness of codes is in turn affected by housing values, as well as by the strength of construction unions. Homeowners and construction unions are thus both observed to gain from restrictive building codes, which can explain the prevalence of such regulations. Copyright American Real Estate and Urban Economics Association.