IDEAS home Printed from https://ideas.repec.org/p/boc/bocoec/240.html
   My bibliography  Save this paper

Technological Progress In A Model Of The Housing Land Cycle

Author

Listed:
  • Richard Arnott

    (Department of Economics, Boston College)

  • Alex Anas

    (S.U.N.Y./Buffalo)

Abstract

A stationary-state perfect foresight model is developed in which housing and land are treated as investment assets convertible to each other at some costs. Investors hold either land or housing and are heterogeneous in the i. i. d idiosyncratic shocks to their conversion costs in every time period. Hence, there are endogenously determined probabilities that a unit of land will be converted to housing ("construction probability") in any given time period. This model is used to analyze the effects of a decrease in construction cost on the asset prices of land and housing, on housing rent and on the stationary stocks of land and housing. A decrease in construction cost always raises land value, that may either raise or lower housing values and increases both the construction and the demolition probabilities. The housing stock increases (decreases) if the construction probability increases proportionally more (less) than the demolition probability. Since housing rent is inversely related to the stock of housing, the fall in construction costs may cause rents to rise. Thus paradoxically, technological progress may hurt renters. The moral of the model is important: in contrast to models of the housing market without land or to models of the housing market without land or to models in which land price is exogenous, the long run supply price of housing is not fully determined by construction cost, but depends as well on demolition cost and on the endogenous value of the land.

Suggested Citation

  • Richard Arnott & Alex Anas, 1993. "Technological Progress In A Model Of The Housing Land Cycle," Boston College Working Papers in Economics 240, Boston College Department of Economics.
  • Handle: RePEc:boc:bocoec:240
    as

    Download full text from publisher

    File URL: http://fmwww.bc.edu/EC-P/wp240.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alex Anas, 2003. "Taxes on Buildings and Land in a Dynamic Model of Real Estate Markets," Urban/Regional 0302004, University Library of Munich, Germany.
    2. Kenneth Gibb & Geoff Meen & Daniel Mackay, 2001. "Choice and Demand in a Social Housing System: Policy Simulations for Glasgow," ERES eres2001_172, European Real Estate Society (ERES).
    3. André de Palma & Stef Proost & Saskia van Der Loo, 2013. "A small model of equilibrium mechanisms in a city," Working Papers halshs-00841105, HAL.
    4. Mansur, Erin T. & Quigley, John M. & Raphael, Steven & Smolensky, Eugene, 2002. "Examining policies to reduce homelessness using a general equilibrium model of the housing market," Journal of Urban Economics, Elsevier, vol. 52(2), pages 316-340, September.
    5. Anas, Alex & Arnott, Richard J., 1997. "Taxes and allowances in a dynamic equilibrium model of urban housing with a size--quality hierarchy," Regional Science and Urban Economics, Elsevier, vol. 27(4-5), pages 547-580, August.
    6. Gibb, Kenneth, 2000. "Modelling Housing Choice and Demand in a Social Housing System: The Case of Glasgow," Berkeley Program on Housing and Urban Policy, Working Paper Series qt40j453z6, Berkeley Program on Housing and Urban Policy.
    7. Quigley, John M. & Raphael, Steven & Smolensky, Eugene, 2001. "Homelessness in California," Berkeley Program on Housing and Urban Policy, Working Paper Series qt2pg3f4ns, Berkeley Program on Housing and Urban Policy.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boc:bocoec:240. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christopher F Baum (email available below). General contact details of provider: https://edirc.repec.org/data/debocus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.