On the Political Economy of Urban Growth: Homeownership versus Affordability
AbstractWe study the equilibrium properties of an overlapping-generation economy where agents choose where to locate, and how much housing to own, and city residents vote on the number of new building permits every period. Under-supply of housing persists in equilibrium under conditions we characterize. City residents invest in housing because they expect their investment to be protected by a majority of voters opposed to urban growth. They vote against growth because they have invested in local housing. This vicious cycle between ownership and urban growth generates a tension between the common housing policy objectives of affordability for all and homeownership for most. Homeownership subsidies increase resistance to urban growth. Capturing the value of new building permits and distributing the proceeds to residents may move the economy away from a welfare-dominated no-growth equilibrium.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8243.
Date of creation: Feb 2011
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Find related papers by JEL classification:
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Housing Supply and Markets
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