Housing Demand, Cost-of-Living Inequality, and the Affordability Crisis

Albouy, David; Ehrlich, Gabriel; Liu, Yingyi

doi:10.3386/w22816

Cited by 103 publications

(82 citation statements)

References 39 publications

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“…9 This function becomes a standard CES function (Arrow et al, 1961) when β → 0 and Cobb-Douglas when σ → 1. Albouy et al (2016) calibrate the model and show that this utility function fits well the patterns of housing consumption in the U.S. by passing tests imposed by rationality and household mobility. The parameters that fit the data are σ = 2/3, η = 1/8, β = 4/3, which yields the following utility…”

Section: βσmentioning

confidence: 90%

“…This market is particularly suitable for this purpose because housing costs account for almost a third of average household expenditures in the U.S. Using a calibrated model of the U.S. housing market due to Albouy et al (2016), we estimate the optimal income tax schedule in the presence of endogenous prices. We find that the price effect leads to 4 − 5% increase in optimal marginal income tax at most income levels.…”

Section: Introductionmentioning

confidence: 99%

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Optimal Income Taxation with Endogenous Prices

Kushnir

Zubrickas

2019

SSRN Journal

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Section: βσmentioning

confidence: 90%

Section: Introductionmentioning

confidence: 99%

Optimal Income Taxation with Endogenous Prices

Kushnir

Zubrickas

2019

SSRN Journal

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“…Concerning the empirical evidence, Cheshire and Sheppard () cannot reject a (land) elasticity of one; Albouy et al . () find an uncompensated (housing) elasticity closer to one than zero.…”

mentioning

confidence: 88%

Commuting and Taxes: Theory, Empirics and Welfare Implications

Agrawal

Hoyt

2017

The Economic Journal

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We examine the effect of interstate differences in income taxes on commuting times. Our theoretical model introduces a border into a model of an urban area and shows that differences in average tax rates distort commuting patterns, but the sign of the effect depends on whether taxes are residencebased or employment-based. Empirically, tax differentials have a large effect on commuting times for affluent households and mobile households. We show that commuting times are a sufficient statistic to measure the spatial welfare effects of tax policy. The model and empirical design can be used by economists to study other policy differences.

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“…Housing costs have risen rapidly relative to incomes over the past 60 years in the United States, particularly in large and economically successful cities (Gyourko et al 2013;Albouy, Ehrlich, and Liu 2016). This trend has increased rent burdens for low-income households, reduced regional economic convergence, and slowed national economic growth (Ganong and Shoag 2017;Hsieh and Moretti 2019).…”

Section: Introductionmentioning

confidence: 99%

Supply Shock Versus Demand Shock: The Local Effects of New Housing in Low-Income Areas

2019

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We study the local effects of new market-rate housing in low-income areas using microdata on large apartment buildings, rents, and migration. New buildings decrease nearby rents by 5 to 7 percent relative to locations slightly farther away or developed later, and they increase in-migration from low-income areas. Results are driven by a large supply effect-we show that new buildings absorb many high-income households-that overwhelms any offsetting endogenous amenity effect. The latter may be small because most new buildings go into already-changing areas. Contrary to common concerns, new buildings slow local rent increases rather than initiate or accelerate them. JEL Codes: R21, R23, R31 the regional and local effects of new housing construction. It benefits both.Causal identification in this setting is challenging because developers select the locations of new buildings based in part on unobserved local characteristics and trends. In addition, the size and shape of a new building's amenity or reputation effects is unknown, making it difficult to know where they may shrink or reverse the negative effect of added supply. We attempt to overcome these challenges by leveraging our unique data to construct three related empirical strategies. The first is a difference-in-differences specification that compares the area very close to a new building to the area slightly farther away (our "near-far" specification). 4 The idea is that frictions in the land assembly and development approval processes lead to random variation in building placement and timing at the hyper-local level, making the outer area a good control for the treated inner area. This specification is well suited to detect one way that new buildings could raise rents-through amenity effects that fade out quickly with distance, such as increased retail options or the replacement of a vacant lot.The second exercise is a difference-in-differences that compares listings near buildings completed in 2015 and 2016 to listings near buildings completed in 2019, after the conclusion of our sample (our "near-near" specification). The underlying logic is that developers choose sites in both groups for similar reasons, but one building is completed before the other for idiosyncratic reasons, such as the timing of when sites are available for purchase. Because the treatment and control areas are not necessarily in the same neighborhood, this specification can detect price changes driven by broader effects that may cross the near-far boundary of the first exercise. A variant of this specification also allows us to examine how congestion effects near the building could influence our results. Finally, we combine both sources of variation into a triple-difference specification that effectively compares the near-far difference around 2015-2016 buildings to the near-far difference around 2019 buildings.We first study the effect on rents using listing-level data from Zillow ™ that span 2013 to 2018. All three empirical approaches show that new construction in low-income neighbo...

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Housing Demand, Cost-of-Living Inequality, and the Affordability Crisis

Cited by 103 publications

References 39 publications

Optimal Income Taxation with Endogenous Prices

Optimal Income Taxation with Endogenous Prices

Commuting and Taxes: Theory, Empirics and Welfare Implications

Supply Shock Versus Demand Shock: The Local Effects of New Housing in Low-Income Areas

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