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Land use regulations and the returns to low-income homeownership

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  • Sarah Riley

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    Abstract

    I investigate the relationship between land use regulations and the house prices of urban low-income homeowners in the United States between 1998 and 2010. Because low-income homeowners generally hold a larger fraction of their wealth as home equity and are less likely to sustain homeownership, the overall financial position of this population is especially dependent on house price movements during short holding periods and the timing of house purchase and sale. The data used for analysis include zip-code-level house price estimates provided by Fannie Mae and proprietary mortgage origination data for a representative sample of low-income US homeowners who received community reinvestment mortgages between 1998 and 2004. I estimate a series of linear mixed-effects models to predict house price appreciation and the risk premium associated with investment in housing as opposed to a risk-free asset. Controlling for a variety of related factors, including land scarcity and subprime lending activity, I find that land use regulations are associated with greater house price volatility and a greater risk premium for urban low-income households. Thus, the results suggest that the dependence of low-income homeowner wealth on the timing of house purchase and sale is weaker in less regulated markets. Copyright Springer-Verlag 2012

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    File URL: http://hdl.handle.net/10.1007/s00168-011-0450-8
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    Bibliographic Info

    Article provided by Springer in its journal The Annals of Regional Science.

    Volume (Year): 49 (2012)
    Issue (Month): 3 (December)
    Pages: 745-766

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    Handle: RePEc:spr:anresc:v:49:y:2012:i:3:p:745-766

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    Related research

    Keywords: R31; R52;

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    References

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    1. Edward L. Glaeser & Joseph Gyourko & Raven Saks, 2005. "Why Have Housing Prices Gone Up?," NBER Working Papers 11129, National Bureau of Economic Research, Inc.
    2. Turner, Tracy M. & Luea, Heather, 2009. "Homeownership, wealth accumulation and income status," Journal of Housing Economics, Elsevier, vol. 18(2), pages 104-114, June.
    3. Di, Zhu Xiao & Belsky, Eric & Liu, Xiaodong, 2007. "Do homeowners achieve more household wealth in the long run?," Journal of Housing Economics, Elsevier, vol. 16(3-4), pages 274-290, November.
    4. Tracy M. Turner & Marc T. Smith, 2009. "Exits From Homeownership: The Effects Of Race, Ethnicity, And Income," Journal of Regional Science, Wiley Blackwell, vol. 49(1), pages 1-32.
    5. Fuad Hasanov & Douglas C. Dacy, 2009. "Yet Another View on Why a Home Is One's Castle," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(1), pages 23-41.
    6. Quigley, John M. & Rosenthal, Larry A., 2005. "The Effects of Land-Use Regulation on the Price of Housing: What Do We Know? What Can We Learn?," Berkeley Program on Housing and Urban Policy, Working Paper Series qt90m9g90w, Berkeley Program on Housing and Urban Policy.
    7. Huang, Haifang & Tang, Yao, 2012. "Residential land use regulation and the US housing price cycle between 2000 and 2009," Journal of Urban Economics, Elsevier, vol. 71(1), pages 93-99.
    8. Coleman IV, Major & LaCour-Little, Michael & Vandell, Kerry D., 2008. "Subprime lending and the housing bubble: Tail wags dog?," Journal of Housing Economics, Elsevier, vol. 17(4), pages 272-290, December.
    9. Cheung, Ron & Ihlanfeldt, Keith & Mayock, Thomas, 2009. "The regulatory tax and house price appreciation in Florida," Journal of Housing Economics, Elsevier, vol. 18(1), pages 34-48, March.
    10. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1253-1296, August.
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    Cited by:
    1. Jae Kim & Geoffrey Hewings, 2013. "Land use regulation and intraregional population–employment interaction," The Annals of Regional Science, Springer, vol. 51(3), pages 671-693, December.

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