Housing Supply and Housing Affordability
Paper Session
Sunday, Jan. 3, 2027 8:00 AM - 10:00 AM (EST)
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Chairs:
Laura Weiwu, University of California-Berkeley - Evan Soltas, Princeton University
Measuring Winners and Losers of Increasing Housing Supply
Abstract
Local governments often restrict the construction of new housing through zoning and permitting hurdles. This resistance suggests that increasing the housing stock in an area may harm some of its existing residents. Understanding these losses is key to facilitating new housing construction. In this paper, we aim to measure who gains and who loses from a local increase in the housing supply, and why. We build a model of household location choices over time, allowing us to measure the effect of construction on amenities, prices, and local taxes. To estimate this model, we employ detailed data describing individual housing units, households and their migration patterns, local public finances, and zoning regulations.How Housing Supply Expansions Reshape Cities
Abstract
We study a large-scale policy relaxing residential land supply constraints near major Dutch cities in the mid-1990s. Land allocation was determined centrally and was unrelated to pre-policy local market dynamics. Using administrative data, we explore effects on housing, mobility, and labor markets. New supply attracted high-income individuals, primarily from nearby high-income neighborhoods, where house prices decreased. New supply also increased local employment in surrounding areas, especially in high-earning occupations. We develop a rich quantitative spatial equilibrium model and show that the impact of relaxing supply constraints on housing markets and welfare crucially depends on job reallocation and on in-migration flows.Mortgage Rate Lock and House Prices
Abstract
When interest rates rise, fixed-rate mortgages generate a financial incentive for owners to keep their homes, creating “rate lock”. Does rate lock dampen the negative impact of rising interest rates on house prices? To estimate rate lock’s causal effect on market-level house prices, we instrument for the rate lock incentive in the outstanding local mortgage stock using unexpected family size shocks that induce moves at times with different mortgage rates. We find that when interest rates increased over 2021-23, a one standard deviation increase in the rate lock incentive, corresponding to a 0.3pp lower average outstanding mortgage rate, caused 2.6pp higher nominal house price growth. To understand the mechanism, we compare moves of owners who purchase homes just before and just after sharp mortgage rate increases. A 1pp lower outstanding mortgage rate reduces moves from owning to renting by 33%, a force increasing the price-to-rent ratio, and reduces overall moves by 42%. Using these estimated effects on mobility, we calibrate a dynamic structural model to quantify how much rate lock offsets the negative aggregate price effects of a higher cost of capital. Model simulations indicate that the 2021-23 tightening would have reduced the price-to-rent ratio by 12.3% with adjustable-rate mortgages, and hence no rate lock, versus only 4.4% with fixed-rate mortgages. Rate lock thus dampens, but does not fully offset, negative price effects of higher interest rates.Discussant(s)
Edward Glaeser
,
Harvard University
Gilles Duranton
,
University of Pennsylvania
Tim McQuade
,
University of California-Berkeley
Antoine Levy
,
University of California-Berkeley
JEL Classifications
- R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location