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The Political Economy of Housing Supply:Homeowners, Workers, and Voters

Author

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  • Francois Ortalo-Magne
  • Andrea Prat

Abstract

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.

Suggested Citation

  • Francois Ortalo-Magne & Andrea Prat, 2007. "The Political Economy of Housing Supply:Homeowners, Workers, and Voters," STICERD - Theoretical Economics Paper Series 514, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stitep:514
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    Cited by:

    1. Ivan Jaccard, 2010. "Asset Pricing and Housing Supply in a Production Economy," 2010 Meeting Papers 605, Society for Economic Dynamics.
    2. Hilber, Christian A.L. & Robert-Nicoud, Frédéric, 2013. "On the origins of land use regulations: Theory and evidence from US metro areas," Journal of Urban Economics, Elsevier, vol. 75(C), pages 29-43.
    3. Hilber, Christian A.L. & Robert-Nicoud, Frédéric, 2013. "On the origins of land use regulations: Theory and evidence from US metro areas," Journal of Urban Economics, Elsevier, vol. 75(C), pages 29-43.
    4. Dascher, Kristof, 2012. "Home Voters, House Prices, and the Political Economy of Zoning," VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62069, Verein für Socialpolitik / German Economic Association.
    5. Todd Sinai, 2010. "Feedback Between Real Estate And Urban Economics," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 423-448, February.
    6. Fran?ois Ortalo-Magn? & Andrea Prat, 2014. "On the Political Economy of Urban Growth: Homeownership versus Affordability," American Economic Journal: Microeconomics, American Economic Association, vol. 6(1), pages 154-181, February.
    7. David Christafore & Susane Leguizamon, 2015. "Spatial Spillovers of Land Use Regulation in the United States," Housing Studies, Taylor & Francis Journals, vol. 30(3), pages 491-503, June.
    8. Charles Ka Yui Leung & Wei Wang, 2007. "An Examination of the Chinese Housing Market through the Lens of the DiPasquale- Wheaton Model: a Graphical Attempt," International Real Estate Review, Global Social Science Institute, vol. 10(2), pages 131-165.
    9. Wrenn, Douglas H. & Irwin, Elena G., 2015. "Time is money: An empirical examination of the effects of regulatory delay on residential subdivision development," Regional Science and Urban Economics, Elsevier, vol. 51(C), pages 25-36.
    10. Guillaume POUYANNE (GREThA-GRES), 2008. "Economics of discontinuous urban development (In French)," Cahiers du GRES (2002-2009) 2008-06, Groupement de Recherches Economiques et Sociales.
    11. Byron F. Lutz, 2009. "Fiscal amenities, school finance reform and the supply side of the Tiebout market," Finance and Economics Discussion Series 2009-18, Board of Governors of the Federal Reserve System (U.S.).
    12. Solé-Ollé, Albert & Viladecans-Marsal, Elisabet, 2012. "Lobbying, political competition, and local land supply: Recent evidence from Spain," Journal of Public Economics, Elsevier, vol. 96(1), pages 10-19.
    13. Solé-Ollé, Albert & Viladecans-Marsal, Elisabet, 2012. "Lobbying, political competition, and local land supply: Recent evidence from Spain," Journal of Public Economics, Elsevier, vol. 96(1), pages 10-19.

    More about this item

    Keywords

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    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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