The Political Economy of Housing Supply:Homeowners, Workers, and Voters
Equilibrium of the housing market depends on a complex set of interactions between: (1)individual location decisions; (2) individual housing investment; (3) collective decisions onurban growth. We embed these three elements in a model of a dynamic economy with twosources of friction: ill-de…ned property rights on future land development and uninsurableshocks a¤ecting labor productivity. We characterize the feedback between the households’desire to invest in housing as a hedge against the risk of rent ‡uctuations and their supportfor supply restrictions once they own housing. The model generates an ine¢ ciently lowsupply of housing in equilibrium. The model also rationalizes the persistence of housingundersupply: the more restricted the initial housing supply, the smaller the city size selectedby the voting process. We use the model to study the e¤ects of a number of policies andinstitutional changes.
|Date of creation:||Jan 2007|
|Date of revision:|
|Contact details of provider:|| Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp|
References listed on IDEAS
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- Christian A.L. Hilber, 2003.
"Neighborhood externality risk and the homeownership status of properties,"
885, Federal Reserve Bank of Chicago.
- Hilber, Christian A.L., 2005. "Neighborhood externality risk and the homeownership status of properties," Journal of Urban Economics, Elsevier, vol. 57(2), pages 213-241, March.
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- Brueckner, Jan K., 1995. "Strategic control of growth in a system of cities," Journal of Public Economics, Elsevier, vol. 57(3), pages 393-416, July.
- Jeffrey A. Dubin & D. Roderick Kiewiet & Charles Noussair, 1992.
"Voting On Growth Control Measures: Preferences And Strategies,"
Economics and Politics,
Wiley Blackwell, vol. 4(2), pages 191-213, 07.
- Dubin, Jeffrey A. & Kiewiet, Roderick D. & Noussair, Charles N., 1991. "Voting on Growth Control Measures: Preferences and Strategies," Working Papers 777, California Institute of Technology, Division of the Humanities and Social Sciences.
- 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.
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