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Ad valorem housing subsidies may reduce house building

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  • Usategui Díaz de Otalora, José María
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    Abstract

    In this paper it is shown that an ad valorem housing subsidy set by a central regulator (or a raise in the ad valorem housing subsidy rate) may reduce the number of houses built in the market and increase the price paid by the buyers of houses. The analysis considers a situation where there is imperfect competition in the housing market and a local regulator that decides on density, or on the number of sites for housing development, and that cares about a combination of the profits of housing developers and the surplus of buyers of houses.

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    File URL: https://addi.ehu.es/bitstream/10810/6683/1/wp2008-03.pdf
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    Bibliographic Info

    Paper provided by University of the Basque Country - Department of Foundations of Economic Analysis II in its series DFAEII Working Papers with number 2008-03.

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    Date of creation: Mar 2008
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    Handle: RePEc:ehu:dfaeii:200803

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    Postal: Dpto. de Fundamentos del Análisis Económico II, = Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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    Keywords: housing subsidies; imperfect competition; price of houses;

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