Recent iber_bphup_working_papers items

The Spatial Consequences of Autarky in Land-Use Regulation: Strategic Interaction or Parallelism?

Tue, 3 Jan 2012 00:00:00 +0000

In most of the United States, land-use regulations are determined independently by the cities and towns within a metropolitan housing market. Despite theoretical analysis of the interaction among regulatory decisions across jurisdictions, empirical evidence is limited. In this paper, we explore the spatial distribution of specific categories of land-use regulations based upon original data collected for the San Francisco Bay Area. We document the strong positive autocorrelation which characterizes regulations enacted independently by local governments in nearby cities. This spatial autocorrelation is somewhat weaker, but still significant, when the demographic determinants of land-use regulations are controlled for in autoregressive models. Similar results have previously been interpreted as evidence of strategic interaction among local governments. However, it is also true that the demographic characteristics of neighboring cities are highly correlated. When both of these...

The Economics of Green Building

Thu, 14 Oct 2010 00:00:00 +0000

Research on climate change suggests that small improvements in the "sustainability" of buildings can have large effects on greenhouse gas emissions and on energy efficiency in the economy. This paper analyzes the economics of "green" building. First, we analyze a panel of office buildings "certified" by independent rating agencies, finding that large recent increases in the supply of green buildings and the unprecedented volatility in property markets have not significantly affected the relative returns to green buildings. Second, we analyze a large cross section of office buildings, demonstrating that economic premiums in rent and asset values are substantial. Third, we relate the economic premiums for green buildings to their sustainability, confirming that the attributes rated for both thermal efficiency and sustainability contribute to premiums in rents and asset values. Even among green buildings, increased energy efficiency is fully capitalized...

How Green is Your Property Portfolio? The Environmental Performance of Commercial Real Estate

Wed, 13 Oct 2010 00:00:00 +0000

How Green is Your Property Portfolio? The Environmental Performance of Commercial Real Estate

Why Do Companies Rent Green? Real Property and Corporate Social Responsibility

Thu, 1 Jul 2010 00:00:00 +0000

This paper provides the first systematic analysis of the choice by organizations to occupy green office space. We develop a framework of ecological responsiveness, and we formulate five propositions to explain why specific firms and industries may be more likely to lease green space. We test these propositions by analyzing the decisions of more than 11,000 tenants to choose office space in green buildings or in otherwise comparable non-green buildings located nearby. We find that corporations in the oil and banking industries, as well as government-related and non-profit organizations, are among the most prominent green tenants. After appropriately controlling for building quality and for location within one quarter mile, our empirical analysis shows that firms in mining and construction and organizations in public administration are relatively more likely to lease green rather than conventional office space. Furthermore, organizations employing higher levels of...

Statistical Analysis of Sales Data to Verify Private Appraisals

Mon, 28 Jun 2010 00:00:00 +0000

Statistical models of real estate price determination can be an important tool in managing the appraisal function. The accuracy of theese models depends crucially on the inclusion of all relevant information as well as on the correct specification of the price function.

This paper proposes a hybrid model of the hedonic price relationship, combining information on single sales and multiple sales of properties. The paper also indicates the utility of such a model in the verification of appraisal data.

Stickball in San Francisco

Thu, 27 May 2010 00:00:00 +0000

Stickball in San Francisco

Real Estate Prices and Economic Cycles

Wed, 26 May 2010 00:00:00 +0000

Real Estate Prices and Economic Cycles

Regulation and Property Values in the United States: The High Cost of Monopoly

Mon, 24 May 2010 00:00:00 +0000

Regulation and Property Values in the United States: The High Cost of Monopoly

Home-buyers, Housing and the Macroeconomy

Mon, 24 May 2010 00:00:00 +0000

We present the results of a new survey of US home-buyers in 2002. The most important finding is that the survey suggests that home-buyers’ expectations are substantially affected by recent experience. Even after a long boom that has taken prices to very high levels, home-buyers typically have expectations that prices will show double-digit annual price growth over the next 10 years, apparently with only a modest level of risk. We conjecture that these characteristics of individuals’ expectations may contribute to the substantial swings that are observed in housing prices. Changes in housing wealth, especially if they are perceived as long-lasting, may have substantial macroeconomic effects through private consumption. In the second part of the paper, we examine the link between increases in housing wealth, financial wealth, and consumer spending. We rely upon a panel of 14 countries observed annually for various periods during the past 25 years and a panel of US states observed...

Just Suppose: Housing Subsidies for Low Income Renters

Mon, 24 May 2010 00:00:00 +0000

Just Suppose: Housing Subsidies for Low Income Renters

Housing Price Dynamics in Time and Space: Predictability, Liquidity and Investor Returns

Sat, 22 May 2010 00:00:00 +0000

It is widely accepted that aggregate housing prices are predictable, but that excess returns to investors are precluded by the transactions costs of buying and selling property. We examine this issue using a unique data set -- all private condominium transactions in Singapore during an eleven-year period. We model directly the price discovery process for individual dwellings. Our empirical results clearly reject a random walk in prices, supporting mean reversion in housing prices and diffusion of innovations over space. We find that, when house prices and aggregate returns are computed from models that erroneously assume a random walk and spatial independence, they are strongly autocorrelated. However, when they are calculated from the appropriate model, predictability in prices and in investment returns is completely absent. We show that this is due to the illiquid nature of housing transactions. We also conduct extensive simulations, over different time horizons and with...

Rent Reform Initiatives In Public Housing and Section 8 Voucher Programs

Thu, 20 May 2010 00:00:00 +0000

Rent Reform Initiatives In Public Housing and Section 8 Voucher Programs

Housing Subsidies and Homeowners: What Role for Government-Sponsored Enterprises?

Thu, 20 May 2010 00:00:00 +0000

Housing Subsidies and Homeowners: What Role for Government-Sponsored Enterprises?

Index Revision, House Price Risk, and the Market for House Price Derivatives

Thu, 20 May 2010 00:00:00 +0000

It is widely recognized that options and futures markets for housing can reduce and manage the risks inherent in consumers’ large investments in housing equity. The integrity of such markets depends, however, upon the use of transparent and replicable benchmarks for house prices and settlement values. In the USA, a series of state and metropolitan indexes have been produced by a government agency (the US Office of Housing Enterprise Oversight, OFHEO), and they have been widely disseminated for over a decade. By construction, the entire historical path of each of these indexes is, in principle, subject to revision quarterly, that is, every time the index is recalculated and data are published. This paper provides the first analysis of the magnitude and bias of these revisions, and it analyzes their systematic effects on the settlement prices in housing options markets. The paper considers the implications of these magnitudes for the development of risk-reducing futures markets.

Housing Policy, Mortgage Policy, and the Federal Housing Administration

Thu, 20 May 2010 00:00:00 +0000

This paper provides a survey of federal housing programs, establishing the primary importance of indirect and off-budget activities in promoting housing and providing subsidies to housing consumers. We consider the role of the Government Sponsored Enterprises (GSEs) and the Veterans’’ Administration in supplying liquidity and credit guarantees. We then consider in more detail the role of the FHA as supplier and guarantor of credit. We especially focus on the rationale for these activities in the light of the rise and subsequent collapse of the subprime mortgage market. We suggest that a reinvigorated FHA mortgage program will be highly useful in its own right and might be the appropriate agency to assume many of the activities currently undertaken by the GSEs.

Local Public Finance

Thu, 20 May 2010 00:00:00 +0000

The mobility of consumers and producers in response to fiscal incentives gives the study of local public finance its distinctive character. Households and firms are partitioned into spatial units on the basis of preferences, costs and the incentives provided by local tax and expenditure policies. These fiscal incentives are, in turn, chosen by the members of each of these jurisdictions or clubs. Externalities within and between these localities greatly affect the efficiency of taxation and the provision of public goods and services.

Neighborhoods, Economic Self-Sufficiency, and the MTO Program

Thu, 20 May 2010 00:00:00 +0000

Neighborhoods, Economic Self-Sufficiency, and the MTO Program

How Housing Booms Unwind: Income Effects, Wealth Effects, and Feedbacks Through Financial Markets

Thu, 20 May 2010 00:00:00 +0000

The National Regulatory Barriers Database Survey Design Experiment: Prospects and Challenges - Where To From Here?

Wed, 19 May 2010 00:00:00 +0000

The National Regulatory Barriers Database Survey Design Experiment: Prospects and Challenges - Where To From Here?

Urbanization, Agglomeration, and Economic Development

Wed, 19 May 2010 00:00:00 +0000

Urbanization, Agglomeration, and Economic Development

A Review Of Recent Literature On Housing Assistance And Self-Sufficiency

Wed, 19 May 2010 00:00:00 +0000

Standard economic theory on subsidies and labor supply raises an unappetizing prospect - that housing assistance may have a negative impact on self-sufficiency. Because of the rent structure in the public housing and Housing Choice Voucher programs, participants may treat program benefits as a substitute form of income and this may dampen their ambitions to increase their own earnings.

According to a comprehensive literature review by Mark Shroder (2002), the evidence for these disincentive effects has been quite mixed. Moreover, the rigor and precision of various research efforts have been somewhat lacking. This study updates Shroder’s work by summarizing and critiquing a variety of recent additions to the literature on housing assistance and its effect upon residents’ progress toward self-sufficiency. These additions include five careful studies which have found that traditional assistance reduces employment and slows income growth. However, countervailing research...

Land Use Regulation with Durable Capital

Wed, 19 May 2010 00:00:00 +0000

This article compares the level and distribution of the welfare changes from restricting land available for residential development in a city. We compare the economic costs when residential capital is durable with the costs when capital is perfectly malleable and those when population is also freely mobile. Our simulation, based on the stylized specification of an urban location model, suggests that in a more realistic setting with durable capital, the costs of regulation are substantially higher than they are when capital is assumed to be malleable or when households are assumed to be fully mobile. Importantly, the extent of wealth redistribution attributable to these regulations is much larger when these more realistic factors are recognized. When capital is durable, the results also imply that far more new development takes place on previously undeveloped land at the urban boundary, sometimes resulting in an increase in total land under development.

Measuring Land-Use Regulations and Their Effects in the Housing Market

Wed, 19 May 2010 00:00:00 +0000

Land-use regulation is undertaken by units of local government and is notoriously hard to measure. This paper assembles and reports the results of five complementary and overlapping surveys of local regulation in the San Francisco Bay Area. We compile measures derived from surveys of public officials conducted in 1992 and 1998 and another completed in 2007. In addition, we survey the perceptions of regulation among developers and land-use intermediaries. A rich description and comparison of regulatory patterns is provided. The paper also investigates relationships among various measures of regulation and housing outcomes. We find, for example, that the entitlement process increases the cost of a new single family dwelling by almost $23,000 in the Bay Area. Moreover, the requirement of an additional review by governmental agents to gain approval of new developments is associated with a four-percent increase in the prices of existing owner-occupied housing.

The Government Sponsored Enterprises: Recovering From a Failed Experiment

Tue, 18 May 2010 00:00:00 +0000

The Federal takeover of Fannie Mae and Freddie Mac last September spells the end of an experiment in the public-private hybrid known as the Government Sponsored Enterprises (GSE). This paper documents the subsidies provided to the enterprises and the public and private benefits generated. The public benefits included somewhat reduced interest rates for borrowers receiving conforming mortgages. The public subsidies allowed the firms to use the implicit guarantee of their debts to borrow at attractive rates to invest in mortgage portfolios and also to provide a fee-based service in issuing mortgage-backed securities.

We suggest reforming the functions provided by the GSEs. In particular we advocate spinning off the portfolio investment activities into a fully private firm. We also advocate conducting the services necessary to issue mortgage-backed securities within a government-owned corporation responsible directly to federal authorities. These reforms would curb excess...

How Housing Busts End: Home Prices, User Cost, and Rigidities During Down Cycles

Tue, 18 May 2010 00:00:00 +0000

How Housing Busts End: Home Prices, User Cost, and Rigidities During Down Cycles

Mortgage Guarantee Programs and the Subprime Crisis

Tue, 18 May 2010 00:00:00 +0000

Mortgage Guarantee Programs and the Subprime Crisis

Local Land-Use Controls and Aging-Friendliness

Thu, 13 May 2010 00:00:00 +0000

Local Land-Use Controls and Aging-Friendliness

New Or Rehab: Striking A New Balance Under California's Affordable Housing Standards

Thu, 13 May 2010 00:00:00 +0000

New Or Rehab: Striking A New Balance Under California's Affordable Housing Standards

Housing Subsidies and the Tax Code: The Case of Mortgage Credit Certificates

Thu, 8 Oct 2009 00:00:00 +0000

The most significant U.S. housing subsidy programs are funded by tax expenditures through the Internal Revenue Code (IRC). Beyond the subsidy to homeownership provided to all owner occupants through the personal income tax, the IRC provides additional subsidies to specific groups of homeowners. The Mortgage Revenue Bond (MRB) program permits lower levels of government to issue tax-exempt debt, using the proceeds to supply mortgages at below-market interest rates to deserving households. States are also permitted to issue and distribute Mortgage Credit Certificates (MCCs) which entitle recipient homeowners to claim a tax credit for some portion of the mortgage interest paid rather than the tax deduction claimed by other homeowners.

This paper documents the wide variations in reliance upon MCCs and MRBs across the United States and the emergence of Mortgage Credit Certificates as the largest housing program administered by the state of California. The paper provides...

Doing Well by Doing Good? Green Office Buildings

Tue, 1 Sep 2009 00:00:00 +0000

This paper provides the first credible evidence on the economic value of the certification of "green buildings" -- value derived from impersonal market transactions rather than engineering estimates. For some 10,000 subject and control buildings, we match publicly available information on the addresses of Energy Star and LEED-rated office buildings to the characteristics of these buildings, their rental rates and selling prices. We find that buildings with a "green rating" command rental rates that are roughly three percent higher per square foot than otherwise identical buildings - controlling for the quality and the specific location of office buildings. Ceteris paribus, premiums in effective rents are even higher - above six percent. Selling prices of green buildings are higher by about 16 percent.

For the Energy-Star-certified buildings in this sample, we subsequently obtained detailed estimates of site and source energy usage from the U.S. Environmental Protection...

Urban Economics

Tue, 2 Jun 2009 00:00:00 +0000

Urban economics emphasizes: the spatial arrangements of households, firms, and capital in metropolitan areas; the externalities which arise from the proximity of households and land uses; and the public policy issues which arise from the interplay of these economic forces.

Urbanization, Productivity and Innovation: Evidence from Investment in Higher Education

Thu, 12 Feb 2009 00:00:00 +0000

During the past two decades, Swedish government policy has decentralized post-secondary education throughout the country. We investigate the economic effects of this decentralization policy on the level of productivity and innovation and their spatial distribution in the national economy. We find important and significant effects of this investment policy upon economic output and the locus of knowledge production, suggesting that the decentralization has affected regional development through local innovation and increased creativity. Our evidence also suggests that aggregate productivity was increased by the deliberate policy of decentralization. Finally, we estimate the spillovers of university investment over space, finding that they are substantial, but that they are greatly attenuated. Agglomerative effects decline rapidly; roughly half of the productivity gains from these investments are manifest within 5- 8 km of the community in which they are made.

Housing Policy in the United States

Thu, 29 May 2008 00:00:00 +0000

The most significant and most expensive housing policy in the United States is the treatment of owner-occupied housing for tax purposes. This treatment of housing under the tax code is analogous to that in many other countries (for example, Sweden), but certainly not in all developed countries (for example, Canada). Federal subsidies to US renter households are much smaller. Policy has evolved from programmes in which the government built, owned, and managed dwellings to programmes emphasizing housing demand through vouchers and rent certificates awarded to eligible households.

The Long-Run Consequences of Living in a Poor Neighborhood

Thu, 13 Sep 2007 00:00:00 +0000

Many social scientists presume that the quality of the neigborhood to which children are exposed affects a variety of long-run social outcomes. I examine the effect on the long-run labor market outcomes of adults who were assigned, when young, to substantially different public housing projects in Toronto. Administrative data are matched to public housing addresses to track children from the program for over 15 years. The main finding is that neighborhood quality plays little role in determining a youth's adult earnings, education attainment, or welfare participation, but does affect exposure to crime. While living in contrasting housing projects cannot explain large variances in labor market outcomes, family differences, as measured by sibling outcome correlations, account for up to 30 percent of the total variance in the data.

Price Discovery in Time and Space: The Course of Condominium Prices in Singapore

Thu, 13 Sep 2007 00:00:00 +0000

A random walk in time and independence in space are maintained hypotheses in traditional empirical models of housing prices. However, there is increasing evidence in the context of hedonic models that housing prices are predictable over time and space. This paper examines the price discovery process in individual dwellings by relaxing both assumptions, using a unique body of data from the Singapore private condominium market in a repeat sales framework. We develop a formal model that tests directly the hypotheses that the prices of individual dwellings follow a random walk over time and that the price of an individual dwelling is independent of the price of a neighboring dwelling. The empirical results clearly support mean reversion in housing prices and also diffusion of innovations over space. This predictability may suggest that excess returns are possible. When aggregate returns are computed from models that assume a random walk and spatial independence, we find that they...

Revisiting the Past and Settling the Score: Index Revision for House Price Derivatives

Thu, 13 Sep 2007 00:00:00 +0000

This paper examines index revision in measuring the prices for owner-occupied housing. We consider the context of equity insurance and the settlement of futures contracts. In addition to other desirable characteristics for aggregate price indexes, their usefulness in these contexts requires stability as they are revised. Methods that are subject to substantial or complex revision raise questions about the viability of derivatives markets. Of course, all indexes are subject to revision as the result of new information. Nevertheless, we find that the most-widely used house price indexes are not equally exposed to volatility in revision. Hedonic indexes appear to be substantially more stable than repeat-sales indexes and are less prone to substantial revision in the light of new information. Moreover, we find that the repeat-sales indexes are subject to systematic downward revision. We analyze alternative settlement procedures and contracts to mitigate the impact of revision...

The Curious Institution of Mobile Home Rent Control: An Analysis of Mobile Home Parks in California

Tue, 3 Jul 2007 00:00:00 +0000

This paper analyzes the implications of rent control as applied to dwellings located in mobile home parks. This form of regulation differs from apartment rent control in that: it is applied selectively to a small portion of the housing stock, and; it regulates the site rents paid to the park owner, not the selling prices of mobile homes. We present a detailed case study of the effects of this institution in three mobile home parks in different cities and regions in California, documenting the capitalization of regulatory rules into the selling prices of housing, and raising questions about the legality as well as the efficacy of the institution.

Economic Fundamentals in Local Housing Markets: Evidence from U.S. Metropolitan Regions

Mon, 6 Nov 2006 00:00:00 +0000

This paper investigates the effects of national and regional economic conditions on housing market outcomes: the prices of owner-occupied housing, vacancies, and residential construction activity. Our three-equation model confirms the importance of changes in regional economic conditions, income and employment on local housing markets. The results provide the first detailed evidence on the importance of vacancies in the owner-occupied housing market in affecting housing prices and supplier activities. The results also document the importance of variations in materials, labor and capital costs and regulation in affecting new supply. Simulation exercises, using standard impulse response models, document the lags in market responses to endogenous shocks and the variations arising from differences in local parameters. The results also suggest the importance of local regulation in affecting the pattern of market responses to regional income shocks.

Real Estate Portfolio Allocation: The European Consumers’ Perspective

Wed, 1 Nov 2006 00:00:00 +0000

Owner occupied housing facilitates household wealth accumulation and the stability of consumption in developed countries. It also contributes to other social goals. But owner-occupied housing is also a risky investment. This paper synthesizes existing knowledge about the riskiness of housing investment in European economies during the past quarter century. It also presents estimates of the potential gains to European consumers from investments in derivatives which may reduce risk at the individual level. We find that futures markets in house price indexes may increase portfolio returns for European investors by several percentage points at the same level of risk. We also consider practical steps to develop markets for these investments.

The Urban Impacts of the Endangered Species Act: A General Equilibrium Analysis

Wed, 20 Sep 2006 00:00:00 +0000

We consider the general equilibrium implications of environmental regulations which result in a reduction of otherwise profitable residential development. Critical habitat designation under the Endangered Species Act is an important example. If the regulations affect a significant amount of land, they may have important effects on the rest of the regional economy-increasing rents and densities on lands not subject to the regulation, causing the conversion of lands from alternative uses, increasing the net developed area in the region, and decreasing consumer welfare. We develop a flexible general equilibrium simulation of the economic effects of critical habitat designation, explicitly considering the distributional effects upon owners of different types of land and upon housing consumers. The results of our simulation show that the most significant economic effects of critical habitat occur outside of the designated area. The prices and rents of non-critical habitat lands...

Federal Credit and Insurance Programs: Housing

Fri, 14 Jul 2006 00:00:00 +0000

This paper reviews the evolution of the major credit and insurance programs undertaken by the U.S. government in support of urban housing. As the review makes clear, the Federal Housing Administration (FHA), Veterans Administration, Federal National Mortgage Association, and Federal Home Loan Mortgage Corporation have played major roles in the development of liberal and efficient primary and secondary mortgage markets in the United States. The development of capacity in mortgage lending and securitization in the private sector does suggest, however, that federally subsidizing mortgage market activities can be restrained with little effect on homeownership- the principal goal of this federal activity. In particular, the orderly reduction in the mortgage investment activities of the government-sponsored enterprises (GSEs) and the imposition of guarantee fees on mortgage-backed securities insured by the GSEs are first steps in restraining federal activity. More generally, a concentration...

Willingness to Pay For the Quality and Intensity of Medical Care: Evidence from Low Income Households in Ghana

Thu, 13 Jul 2006 00:00:00 +0000

This paper presents estimates of willingness to pay for medical care, including the quality and intensity of medical treatment sought in response to illness or injury. The empirical analysis is based on some 5000 observations on the behavior of low income households in Ghana in 1986. The results indicate that the decision to seek medical treatment is responsive to household income. Prices have significant but inelastic influences on the choice among types of treatment and the intensity of treatment sought. Availability of treatment has a substantial effect upon the types of treatment and the utilization of facilities. These results are robust to changes in the structure of the estimating model.

Community Capitalism: How Housing Advocates, the Private Sector, and Government Forged New Low-Income Housing Policy, 1968–1996

Thu, 13 Jul 2006 00:00:00 +0000

Some scholars argue that the state jealously guards its power and budgets, slowly adding to them over time. Recent U.S. public policy history offers a challenge to this interpretation. Since the 1970s, the government has been shedding capacity. Government increasingly has relied on a new incentive structure to build institutional capacity outside of government. Low-income housing policies were the vanguard of this change. The federal housing bureaucracy grew from the 1930s to the 1960s but was bypassed in the 1970s in favor of a network of new players—state and local government, private and nonprofit corporations, and consultants. This new network has been effective in delivering housing producing more than 1 million subsidized homes in the 1980s and 1990s. This article outlines the political debates of over the evolution of this network - from a recommitment to low-income housing production in the 1960s, to attacks on government housing programs in the 1980s, and finally to...

The Dividend Pricing Model: New Evidence from the Korean Housing Market.

Thu, 13 Jul 2006 00:00:00 +0000

It is generally conceded that dividend pricing models are poor predictors of asset prices. This finding is sometimes attributed to excess volatility or to a dividend process manipulated by firm managers. In this paper, we present rather powerful panel tests of the dividend pricing relation using a unique data set in which dividends are set by market forces independent of managers’ preferences. We rely on observations on the market for condominium dwellings in Korea – perhaps the only market in which information on dividends and prices is publicly and continuously available to consumers and investors. We extend the “dividend-price ratio model” to panels of housing returns and rents differentiated by type and location. We find broad support for the dividend pricing model during periods both before and after the Asian Financial Crisis of 1997–1998, suggesting that the market for housing assets in Korea has been remarkably efficient.

Agglomeration and the Spatial Distribution of Creativity

Thu, 13 Jul 2006 00:00:00 +0000

This article analyses the spatial distribution of "creativity" - the production of new knowledge. We analyse commercial patents granted in Sweden between 1994 and 2001 using a panel of 100 labour market areas that encompass the entire country. We relate patent activity to measures of localisation and urbanisation, to the industrial composition and size distribution of firms, and to the regional distribution of human capital. Our analysis confirms the importance of human capital and research facilities in stimulating regional patent output. Our results document the importance of agglomeration and spatial factors in influencing creativity: patent activity is increased in larger and more dense labour markets and in regions in which a larger fraction of the labour force is employed in medium-sized firms. Our results also indicate that creativity is greater in labour markets with more diverse employment bases and in those which contain a larger share of national employment in certain...

A General Equilibrium Analysis of Land Use Restrictions and Residential Welfare

Thu, 13 Jul 2006 00:00:00 +0000

We consider the general equilibrium implications of land use restrictions which result in a reduction of otherwise profitable residential development. If the regulations affect a significant amount of land, they may have important effects on the rest of the regional economy -increasing rents and densities on lands not subject to the regulation, causing the conversion of lands from alternative uses, increasing the net developed area in the region, and decreasing consumer welfare. We develop a flexible general equilibrium simulation of the economic effects of land use restrictions, explicitly considering the distributional effects upon owners of different types of land and upon housing consumers. The results of our simulation show that the most significant economic effects of land use regulations occur outside of the designated area. The prices and rents of non-restricted lands increase significantly, and the well being of housing consumers is further affected through these linkages.<...

Regulation and the High Cost of Housing in California

Mon, 24 Apr 2006 00:00:00 +0000

During the three-year period ending in July 2003, the rise in housing costs in California far exceeded the national inflation rate. Housing prices in five coastal counties increased by more than 60 percent. For the highest quintile of cities, prices increased by an average of more than thirty percent per year. Evidently California housing markets differ along important dimensions from those in the rest of the country. One striking difference is the degree of regulation governing land use and residential construction. California represents the most extreme example of autarky in land use regulations of any U.S. state. Cities are free to set their rules independently, with little oversight. Moreover, state tax policy creates incentives that are likely to decrease production an increase housing costs. Property taxes are constitutionally limited to one percent of acquisition costs while cities are permitted a share of local sales tax receipts. This creates a regulatory...

The Effects of Prevaling Wage Requirements on the Cost of Low-Income Housing

Mon, 3 Oct 2005 00:00:00 +0000

Recent California legislation extends the application of prevailing wage regulations to subsidized low-income residential construction projects. This paper estimates the cost and supply effects of this legislation. Econometric evidence based on recently completed tax-credit projects in California demonstrates that construction costs increase substantially under prevailing wage requirements. Estimates of additional construction costs in our most extensive models range from 9 to 32 percent. The analysis controls for variations in cost by geographical location and for differences in project characteristics, financing, and developer attributes. We estimate the effect of uniform imposition of these regulations on the number of new dwellings for low-income households produced under the tax credit program. Under reasonable conditions, our mid-range estimate of this prospective decrease exceeds 2,600 units per year.

The Anatomy of Rent Burdens: Immigration, Growth and Rental Housing

Thu, 4 Aug 2005 00:00:00 +0000

This paper assesses whether growth in the immigrant population over the past two decades has adversely affected the housing consumption opportunities of native renter households. We find that the monthly housing expenses of native renters are higher in metropolitan areas with larger immigrant populations. However, these marginal effects are comparable for both native households in direct competition with immigrants and native households that are unlikely to compete with immigrants in the housing market. Moreover, while average native rents increase as the proportion immigrant increases within a given metropolitan area, the same is not true for rent-to-income ratios. We do find that native households in metropolitan areas with large immigrant populations consume fewer rooms and are relatively more likely to reside in crowded conditions. This result holds in an analysis of cross-sectional variation as well as the analysis of changes within metropolitan areas. However, there...

The Effects of Land-Use Regulation on the Price of Housing: What Do We Know? What Can We Learn?

Fri, 22 Jul 2005 00:00:00 +0000

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...

Comparing Wealth Effects: The Stock Market versus the Housing Market

Tue, 28 Jun 2005 00:00:00 +0000

We examine the link between increases in housing wealth, financial wealth, and consumer spending. We rely upon a panel of 14 countries observed annually for various periods during the past 25 years and a panel of U.S. states observed quarterly during the 1980s and 1990s. We impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regression models in levels, first differences and in error-correction form, relating consumption to income and wealth measures. We find a statistically significant and rather large effect of housing wealth upon household consumption.

Spatial Effects upon Unemployment Outcomes: The Case of New Jersey Teenagers.

Fri, 24 Jun 2005 00:00:00 +0000

Theories about the importance of space in urban labor markets have emphasized the role of employment access, on the one hand, and neighborhood composition, on the other hand, in affecting employment outcomes. This paper presents an empirical analysis which considers both of these factors, together with individual human capital characteristics and household attributes in affecting youth employment.

The analysis is based upon an unusually rich sample of micro data on youth in four New Jersey metropolitan areas. The empirical analysis is based on a sample of some 28,000 at home youth, matched to detailed census tract demographic information and specially constructed measures of employment access. The research includes a comparison of the importance of neighborhood and access in affecting youth employment when individual and household attributes are also measured. The results demonstrate the overall importance of these spatial factors (particularly neighborhood composition)...

Monetary Policy and Household Mobility: The Effects of Mortgage Interest Rats.

Thu, 23 Jun 2005 00:00:00 +0000

This paper tests the "lock−in" effect of mortgage contract terms and establishes the link between changes in market interest rates and homeowner mobility. The analysis is based on the Panel Study of Income Dynamics during 1990−1993, when mortgage interest rates declined by almost 30 percent.

Homelessness in California

Thu, 23 Jun 2005 00:00:00 +0000

Rapidly rising homelessness in the 1980s shocked Americans and led to a flurry of studies, a deluge of news stories, and to Public Law 100-77, the Stewart B. McKinney Homeless Assistance Act of July 1987. The McKinney Act marked the entrance of the federal government into homelessness policy, which, until then, had been a purely local issue. A dozen years later, housing the homeless remains a recurrent political issue in many cities in California. Improving the quality of life of those without a regular and decent place to spend the night rests primarily with a multitude of nonprofit organizations. Meagerly funded by all levels of government, they must not only house the homeless but must also attend to their many personal problems. While a multifaceted approach is probably required to eliminate the homelessness problem, in California homelessness might be substantially reduced with modest policy changes attacking the problem in the most obvious way: by adding to the stock...

Federalism and Reductions in the Federal Budget

Thu, 23 Jun 2005 00:00:00 +0000

(No abstract)

Transactions Costs and Housing Markets

Fri, 3 Jun 2005 00:00:00 +0000

(no abstract available)

Opportunities, Race, and Urban Location: the Influence of John Kain

Wed, 27 Oct 2004 00:00:00 +0000

No economist studying the spatial economy of urban areas today would ignore the effects of race on housing markets and labor market opportunities, but this was not always the case. John Kain developed much of urban economics but, more importantly, legitimized and encouraged scholarly consideration of the geography of racial opportunities. His provocative study of the linkage between housing segregation and the labor market opportunities of Blacks arose from his work on employment decentralization and constraints on Black residential choice. His later research program on school outcomes was similarly focused in how the economic opportunities of minority households vary with location. John Kain’s scientific work forms a legacy linked by the study of the urban disadvantaged.

Agglomeration and Networks in Spatial Economies

Wed, 27 Oct 2004 00:00:00 +0000

We consider the parallel developments in the economics of agglomeration and the economics of networks. We explore the complentarities between the productivity benefits of agglomeration and those of network linkages, arguing that networks of actors dispersed over space may substitute for agglomerations of actors at a single point.

Is Housing Unaffordable? Why Isn't It More Affordable?

Fri, 1 Oct 2004 00:00:00 +0000

This paper reviews trends in housing affordability in the U.S. over the past four decades. There is little evidence that owner-occupied housing has become less affordable. In contrast, there have been modest increases in the fraction of income that the median renter household devotes to housing. We find pronounced increases in the rent burdens for poor households.

We explore the low-income rental market, analyzing the importance of changes in the income distribution, and in housing quality in affecting rent burdens. We conclude that zoning and land use restrictions are more important factors driving up rents. We also sketch out some policies that might improve housing affordability.

Selectivity, Quality Adjustment and Mean Reversion in the Measurement of House Values

Tue, 28 Sep 2004 00:00:00 +0000

This paper develops a model of price formation in the housing market which accounts for non-random selection of those dwellings sold on the market from the stock of existing houses. The model also accounts for changes in the quality of dwellings themselves and tests for mean reversion in individual house prices. The model is applied to a unique body of data representing all dwellings sold in Sweden's largest metropolitan area during the period 1982-1999. The analysis compares house price indices that account for selectivity, quality change and mean reversion with the conventional repeat sales models used to describe the course of metropolitan housing prices.

The Role of the University in Attracting High Tech Entrepreneurship: A Silicon Valley Tale

Fri, 24 Sep 2004 00:00:00 +0000

Among the many sorting functions provided by institutions of higher education, there is a geographic dimension. During the years spent as students and residents of local communities, students develop specific networks and contacts, and perhaps their tastes change as well. After graduation, these students may be more likely to reside in the locality or region in which they have been educated.

This paper presents evidence which suggests that the university is important in attracting human capital to the local area and in stimulating entrepreneurial talent in the region.

We also measure the strength of the impact of the university on geographical location in one specific instance. For post-graduate professional business and engineering students at Berkeley, we compare the spatial distribution of residences before attending the university and again after graduation.

The results are suggestive of the importance of academic institutions in the geographic pattern...

Homeowner Mobility and Mortgage Interest Rates: New Evidence from the 1990s

Thu, 9 Sep 2004 00:00:00 +0000

When interest rates vary, the value to a homeowner of a mortgage at a fixed interest rate varies as well. In particular, if mortgages are not fully assumable, then when interest rates increase, the value of a preexisting mortgage contract increases as well. Thus, homeowners have an incentive to postpone moving in response to other economic incentives. Similarly, when interest rates decrease, households that had previously postponed moving now have this disincentive removed. The only empirical evidence on the magnitude of this effect is based upon the period of unusual volatility and increasing interest rates in the late 1970s. This paper investigates the importance of these mortgage contracts upon mobility during a more typical environment, the early 1990s, when much lower interest rates declined further. Thus, it investigates the implications for mobility of a decline in the “lock in” effect of mortgage contracts. The paper uses the same data source and methodology that had...

University Decentralization as Regional Policy: The Swedish Experiment

Sat, 10 Jul 2004 00:00:00 +0000

During the past 15 years, Swedish higher education policy has emphasized the spatial decentralization of post-secondary education. We investigate the economic effects of this decentralization policy on productivity and output per worker. We rely upon a 14-year panel of output and employment for Sweden’s 285 municipalities, together with data on the location of university-based researchers and students, to estimate the effects of exogenous changes in educational policy upon regional development. We find important and significant effects of this policy upon the average productivity of workers, suggesting that the economic effects of the decentralization on regional development are economically important. We also find evidence of highly significant, but extremely localized, externalities in productivity. This is consistent with recent findings (e.g., Rosenthal and Strange, 2003) on agglomeration in ‘knowledge industries.’

Woodhead Behavior and the Pricing of Residential Mortgages

Tue, 29 Jun 2004 00:00:00 +0000

Mortgage terminations arise because borrowers exercise options. This paper investigates the apparently irrational behavior of those borrowers who do not terminate their mortgages even when the exercise value of the option is deeply in the money.

We develop an option-based empirical model to analyze this phenomenon -- the behavior of irrational or boundedly rational “woodheads.” Of course we do not observe “woodheads” explicitly in any body of data. Instead, we analyze the correlates of unobserved heterogeneity within a large sample of mortgage holders. We develop a three-stage maximum likelihood (3SML) estimator using martingale transforms to estimate the competing risks of mortgage prepayment and default, recognizing unobserved heterogeneity which is due in part to the behavior of “woodheads.” The extended model is clearly superior to alternatives on statistical grounds.

We then analyze the economic implications of this more powerful model. We analyze the predictions...

The Economics of Housing Services in Low Income Neighborhoods

Tue, 29 Jun 2004 00:00:00 +0000

The Economics of Housing Services in Low Income Neighborhoods

Public Transit and the Spatial Distribution of Minority Employment: Evidence from a Natural Experiment

Mon, 24 May 2004 00:00:00 +0000

A recent expansion of the San Francisco Bay Area’s heavy rail system represents an exogenous change in the accessibility of inner-city minority communities to a concentrated suburban employment center. We evaluate this natural experiment by conducting a two-wave longitudinal survey of firms, with the first wave of inter- views conducted immediately before the opening of service, and the second wave approximately a year later. Within-firm changes in the propensity to hire minority workers for firms near the station were compared with those located farther away. Also estimated was the effect of employer distance to the new stations on changes in propensity to hire minorities. Results indicate a sizable increase in the hiring of Latinos near the new stations, but little evidence of an effect on black hiring rates.

Local Land Use Controls and Demographic Outcomes in a Booming Economy

Tue, 6 Apr 2004 00:00:00 +0000

The article analyses the link between autarchic land-use policies adopted by local governments in California and the substantial redistribution of its population during the decade of the 1990s. Changes in population growth by racial and ethnic group in California cities are related to measures of the extent to which locally adopted policy favours expansion of the single-family housing stock. Controlling for the initial conditions of housing and labour markets by relying upon census measures for 1990, the paper accounts for the potential endogeneity of contemporaneous land-use policies by relying upon exogenous measures of the ‘exclusivity’ and ‘pro-growth’ propensities of the local public sector recorded by a state-wide survey in the early 1990s.

Examining Policies to Reduce Homelessness Using a General Equilibrium Model of the Housing Market

Mon, 12 May 2003 00:00:00 +0000

In this paper, we use a general equilibrium simulation model to assess the potential impacts on homelessness of various housing-market policy interventions. We calibrate the model to the four largest metropolitan areas in California. We explore the welfare con- sequences and the effects on homelessness of three housing-market policy interventions: extending housing vouchers to all low-income households, subsidizing all landlords, and subsidizing those landlords who supply low-income housing. Our results suggest that a very large fraction of homelessness can be eliminated through increased reliance upon well-known housing subsidy policies.

The Economics of Homelessness: The Evidence from North America

Wed, 23 Oct 2002 00:00:00 +0000

It is generally believed that the increased incidence of homelessness in the US has arisen from broad societal factors – changes in the institutionalization of the mentally ill, increases in drug addiction and alcohol usage, etc. This paper reports on a comprehensive test of the alternate hypothesis that variations in homelessness arise from changed circumstances in the housing market and in the income distribution. We utilize essentially all the systematic information available on homelessness in US urban areas – census counts, shelter bed counts, records of transfer payments, and administrative agency estimates. We use these data to estimate the effects of housing prices, vacancies, and rent-to-income ratios upon the incidence of homelessness. Our results suggest that simple economic principles governing the availability and pricing of housing and the growth in demand for the lowest quality housing explain a large portion of the variation in homelessness among US metropolitan...

Hedging Housing Risk

Wed, 24 Apr 2002 00:00:00 +0000

An unusually rich source of data on housing prices in Stockholm is used to analyze the investment implications of housing choices. This empirical analysis derives market-wide price and return series for housing investment during a 13-year period, and it also provides estimates of the individual-speci®c, idiosyncratic, variation in housing returns. Because the idiosyncratic component follows an autocorrelated process, the analysis of portfolio choice is dependent upon the holding period. We analyze the composition of household investment portfolios containing housing, common stocks, stocks in real estate holding companies, bonds, and t-bills. For short holding periods, the ef®cient portfolio contains essentially no housing. For longer periods, low-risk portfolios contain 15 to 50 percent housing. These results suggest that there are large potential gains from policies or institutions that would permit households to hedge their lumpy investments in housing. We estimate the potential...

The Renaissance in Regional Research

Thu, 4 Apr 2002 00:00:00 +0000

The Renaissance in Regional Research

A Decent Home: Housing Policy in Perspective

Wed, 3 Apr 2002 00:00:00 +0000

This paper provides a selective review of two aspects of urban policy in the U.S. -- federal policy providing housing subsidies for lower income households, and federal support for urban redevelopment and physical renewal. The paper reviews four periods in the history of American housing policy, indicating the major equity and efficiency issues in delivering housing services, the factors affecting program costs, and the development of more effective programs. The paper also traces urban development policy from the urban renewal partnership sponsored by the 1949 Housing Act to the present, indicating the linkage between theories of intergovernmental fiscal relations and the evolution of programs. The analysis is mostly an exercise in positive economics, explicating the development of policies, their economic rationale, and economic consequences. However, inevitably, there is some attention paid to the normative aspects of these programs.

Homeless in America, Homeless in California

Wed, 3 Apr 2002 00:00:00 +0000

It is generally believed that the increased incidence of homelessness in the United States has arisen from broad societal factors, such as changes in the institutionalization of the mentally ill, increases in drug addiction and alcohol usage, and so forth. This paper presents a comprehensive test of the alternate hypothesis that variations in homelessness arise from changed circumstances in the housing market and in the income distribution. We assemble essentially all the systematic information available on homelessness in U.S. urban areas: census counts, shelter bed counts, records of transfer payments, and administrative agency estimates. We estimate similar statistical models using four different samples of data on the incidence of homelessness, defined according to very different criteria. Our results suggest that simple economic principles governing the availability and pricing of housing and the growth in demand for the lowest-quality housing explain a large portion of...

Mortgage Terminations, Heterogeneity, and the Exercise of Mortgage Options