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Spillover effects from new housing supply

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  • Nicolás González-Pampillón

Abstract

I estimate spillovers from new housing supply on house prices, crime rates, and household income. To estimate these effects, I use exogenous variation in supply induced by a housing subsidy implemented in middle-income neighborhoods in the city of Montevideo. The program incentivized residential development through tax breaks that led to sizable investments in certain neighborhoods. I exploit the spatial structure of the scheme to identify the externalities and find clear evidence of spillovers from new supply on house prices, with prices increasing between 12 and 17%. Property crime rates only decreased in the short term, while there is evidence of an increase in household income, suggesting that the neighborhood income mix responded to the supply expansion. Increasing supply appears to revitalize neighborhoods, but these effects also reduce housing affordability.

Suggested Citation

  • Nicolás González-Pampillón, 2019. "Spillover effects from new housing supply," CEP Discussion Papers dp1660, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1660
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    More about this item

    Keywords

    housing supply; House prices; neighborhood change; crime; difference-in-differences; Housing policies;
    All these keywords.

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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