The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco

Diamond, Rebecca; McQuade, Timothy; Qian, Franklin

doi:10.3386/w24181

Cited by 74 publications

(101 citation statements)

References 9 publications

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“…We start by verifying that our measure of z is robust to controlling for house prices and selection. Figure 11 in Appendix D.2 displays mean log daily real wages 22 across deciles of z-rank. It also plots the average residual wages from a standard Mincer regression with a full set of gender, age, occupation and industry …xed e¤ects.…”

Section: The Impact Of Location On Wagesmentioning

confidence: 99%

Location as an Asset

Bilal¹,

Rossi‐Hansberg²

2018

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The location of individuals determines their job opportunities, living amenities, and housing costs. We argue that it is useful to conceptualize the location choice of individuals as a decision to invest in a 'location asset.' This asset has a cost equal to the location's rent, and a payoff through better job opportunities and, potentially, more human capital for the individual and her children. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with good future opportunities. In contrast, borrowers transfer resources to the present by going to cheap locations that offer few other advantages. As in a standard portfolio problem, holdings of this asset depend on the comparison of its rate of return with that of other assets. Differently from other assets, the location asset is not subject to borrowing constraints, so it is used by individuals with little or no wealth that want to borrow. We provide an analytical model to make this idea precise and to derive a number of related implications, including an agent's mobility choices after experiencing negative income shocks. The model can rationalize why low wealth individuals locate in low income regions with low opportunities even in the absence of mobility costs. We document the investment dimension of location, and confirm the core predictions of our theory with French individual panel data from tax returns. AbstractThe location of individuals determines their job opportunities, living amenities, and housing costs. We argue that it is useful to conceptualize the location choice of individuals as a decision to invest in a 'location asset'. This asset has a cost equal to the location's rent, and a payo¤ through better job opportunities and, potentially, more human capital for the individual and her children. As with any asset, savers in the location asset transfer resources into the future by going to expensive locations with good future opportunities. In contrast, borrowers transfer resources to the present by going to cheap locations that o¤er few other advantages. As in a standard portfolio problem, holdings of this asset depend on the comparison of its rate of return with that of other assets. Di¤erently from other assets, the location asset is not subject to borrowing constraints, so it is used by individuals with little or no wealth that want to borrow. We provide an analytical model to make this idea precise and to derive a number of related implications, including an agent's mobility choices after experiencing negative income shocks. The model can rationalize why low wealth individuals locate in low income regions with low opportunities even in the absence of mobility costs. We document the investment dimension of location, and con…rm the core predictions of our theory with French individual panel data from tax returns.

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Section: The Impact Of Location On Wagesmentioning

confidence: 99%

Location as an Asset

Bilal¹,

Rossi‐Hansberg²

2018

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“…Figure 1 plots the average daily wage from the BHP, adjusted for cost-of-living differences from the BBSR survey, for each county in Germany. 9 The large wage gap is not driven by a few outlier counties: Figure 16 in Appendix E shows that close 7 Without the scope to survey the literature, some references where each hypothesis is central are as follows: i) Combes, Duranton, and Gobillon (2008); Gollin, Lagakos, and Waugh (2014) ;Hicks, Kleemans, Li, and Miguel (2017); ii) Brueckner, Thisse, and Zenou (1999); Diamond (2016); Lagakos, Mobarak, and Waugh (2018); iii) Kennan and Walker (2011); Bryan and Morten (2019) ;Diamond, McQuade, and Qian (2019).…”

Section: Fact 1: Persistent Wage Gap Not Due To Observablesmentioning

confidence: 99%

Spatial Wage Gaps in Frictional Labor Markets

Porzio

Heise

2019

Preprint

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We develop a job ladder model with labor reallocation across firms and regions, and estimate it on matched employer-employee data to study the large and persistent real wage gap between East and West Germany. We find that the wage gap is mostly due to firms paying higher wages per efficiency unit in West Germany and quantify a rich set of frictions preventing worker reallocation across space and across firms. We find that three spatial barriers impede East Germans' ability to migrate West: migration costs, a preference to live in the East, and fewer job opportunities received from the West. The estimated model highlights that the spatial barriers needed to generate the large wage gap between East and West are small relative to the frictions preventing the reallocation of labor across firms. Therefore, policies that directly promote regional integration lead to smaller aggregate benefits than equally costly hiring subsidies within region. * The views and opinions expressed in this work do not necessarily represent the views of the Federal Reserve Bank of New York. This study uses the weakly anonymous Establishment History Panel (Years 1975(Years -2014 and the Linked-Employer-Employee Data (LIAB) Longitudinal Model 1993-2014 (LIAB LM 9314).

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“…23 The triangle-marked line shows the number of migrants to the new building, the square-marked line shows migrants to the surrounding 250 meters excluding moves into the 19 Appendix Figure A.3 plots the ratio of the Infutor and Census populations against tract characteristics. Additional validation is provided in Diamond, McQuade, and Qian (2019), which introduced the data to the academic literature. 20 We assess this by computing the average annual migration rate at the county level in the Infutor data and comparing it to census estimates (which are not available below the county level).…”

Section: Individual Migration Datamentioning

confidence: 99%

“…21 Infutor does not provide information on income for individuals themselves. Proxying for individual income with origin neighborhood income is similar to Mast (2019) and Diamond, McQuade, and Qian (2019).…”

Section: Individual Migration Datamentioning

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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The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco

Abstract: NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Cited by 74 publications

References 9 publications

Location as an Asset

Location as an Asset

Spatial Wage Gaps in Frictional Labor Markets

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

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