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On the Political Economy of Urban Growth: Homeownership versus Affordability

  • Fran?ois Ortalo-Magn?
  • Andrea Prat

We 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. Undersupply 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 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.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/mic.6.1.154
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File URL: http://www.aeaweb.org/aej/mic/ds/0601/2011-0184_ds.zip
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Article provided by American Economic Association in its journal American Economic Journal: Microeconomics.

Volume (Year): 6 (2014)
Issue (Month): 1 (February)
Pages: 154-81

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Handle: RePEc:aea:aejmic:v:6:y:2014:i:1:p:154-81
Note: DOI: 10.1257/mic.6.1.154
Contact details of provider: Web page: https://www.aeaweb.org/aej-micro
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  1. Rose, Louis A., 1989. "Urban land supply: Natural and contrived restrictions," Journal of Urban Economics, Elsevier, vol. 25(3), pages 325-345, May.
  2. Todd Sinai & Nicholas S. Souleles, 2003. "Owner-Occupied Housing as a Hedge Against Rent Risk," NBER Working Papers 9462, National Bureau of Economic Research, Inc.
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  7. Stephen H. Shore & Todd Sinai, 2005. "Commitment, Risk, and Consumption: Do Birds of a Feather Have Bigger Nests?," NBER Working Papers 11588, National Bureau of Economic Research, Inc.
  8. Todd M. Sinai & Nicholas S. Souleles, 2009. "Can Owning a Home Hedge the Risk of Moving?," NBER Working Papers 15462, National Bureau of Economic Research, Inc.
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  12. Bertaud, Alain & Brueckner, Jan K., 2004. "Analyzing building height restrictions - predicted impacts, welfare costs, and a case study of Bangalore, India," Policy Research Working Paper Series 3290, The World Bank.
  13. Glaeser, Edward L & Gyourko, Joseph & Saks, Raven, 2005. "Why Is Manhattan So Expensive? Regulation and the Rise in Housing Prices," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 331-69, October.
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  18. repec:cep:stitep:/2010/546 is not listed on IDEAS
  19. Davidoff, Thomas, 2006. "Labor income, housing prices, and homeownership," Journal of Urban Economics, Elsevier, vol. 59(2), pages 209-235, March.
  20. James A. Thorson, 1996. "An Examination of the Monopoly Zoning Hypothesis," Land Economics, University of Wisconsin Press, vol. 72(1), pages 43-55.
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