Full Citation
Title: Housing Supply and Affordability
Citation Type: Miscellaneous
Publication Year: 2019
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Abstract: We examine how housing supply constraints affect housing affordability, which we define as the quality-adjusted price of housing services. Our dynamic model predicts that supply constraints will increase the price of housing services by only about half has much as the purchase price of a home, since the purchase price responds to expected future increases in rent as well as contemporaneous rent increases. In the model, households respond to changes in the price of housing services by altering their consumption and location choices, further reducing the implications of supply constraints for housing expenditures. Next, we estimate the effects of common measures of supply constraints on housing outcomes using data from US metropolitan areas from 1980 to 2016. We find sizeable effects of supply constraints on house prices, but modest-to-negligible effects on rent, unit size, lot size, location choice within metropolitan areas, sorting across metropolitan areas, and housing expenditures. We conclude that housing supply constraints distort housing consumption and affordability much less than their estimated effects on house prices would suggest. 1
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Authors: Molloy, Raven; Nathanson, Charles G; Federal, Andrew Paciorek
Publisher: Federal Reserve Board
Data Collections: IPUMS USA
Topics: Housing and Segregation, Other
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