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Housing supply and affordability: Evidence from rents, housing consumption and household location

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  • Molloy, Raven
  • Nathanson, Charles G.
  • Paciorek, Andrew

Abstract

We examine the effects of housing supply constraints on housing affordability, which we measure directly using quality-adjusted rent as well as indirectly using structure sizes, lot sizes and household location choices. Empirically, we find that housing supply constraints have only modest effects on rents and housing consumption despite their larger effects on city growth and the price to purchase homes. Calibration of a dynamic, spatial equilibrium model shows that supply constraints increase price-rent ratios because investors expect future rents to increase more with expected demand growth. Because rent is what matters for affordability, supply constraints have reduced affordability less than is commonly understood despite their sizable effects on the purchase prices of homes.

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  • Molloy, Raven & Nathanson, Charles G. & Paciorek, Andrew, 2022. "Housing supply and affordability: Evidence from rents, housing consumption and household location," Journal of Urban Economics, Elsevier, vol. 129(C).
    • Handle: RePEc:eee:juecon:v:129:y:2022:i:c:s0094119022000043
    DOI: 10.1016/j.jue.2022.103427
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    More about this item

    Keywords

    Housing supply; Affordability;

    JEL classification:

    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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