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On the economic impacts of mortgage credit expansion policies: evidence from help to buy

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  • Carozzi, Felipe
  • Hilber, Christian A. L.
  • Yu, Xiaolun

Abstract

We take advantage of two spatial discontinuities in Britain's Help to Buy (HtB) scheme to explore the effectiveness and distributional implications of mortgage credit expansion policies. Employing a Difference-in-Discontinuities design, we find that HtB significantly increased house prices and had no detectable effect on construction volumes in severely supply constrained and unaffordable Greater London. Conversely, HtB did increase construction numbers without a noticeable effect on prices near the English/Welsh border, an affordable area with comparably lax supply conditions. While HtB did not help would-be-buyers in already unaffordable areas, it boosted the financial performance of developers participating in the scheme.

Suggested Citation

  • Carozzi, Felipe & Hilber, Christian A. L. & Yu, Xiaolun, 2024. "On the economic impacts of mortgage credit expansion policies: evidence from help to buy," LSE Research Online Documents on Economics 120627, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:120627
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    Cited by:

    1. Montebruno, Piero & Silva, Olmo & Szumilo, Nikodem, 2021. "Judge Dread: court severity, repossession risk and demand in mortgage and housing markets," LSE Research Online Documents on Economics 114435, London School of Economics and Political Science, LSE Library.
    2. Alexander Daminger, 2023. "Homeowner Subsidies and Suburban Living: Empirical Evidence from a Subsidy Repeal," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 79(2), pages 111-145.
    3. Kunovac, Davor & Zilic, Ivan, 2022. "The effect of housing loan subsidies on affordability: Evidence from Croatia," Journal of Housing Economics, Elsevier, vol. 55(C).
    4. Paul Cheshire & Christian A. L. Hilber & Olivier Schöni, 2021. "The pandemic and the housing market: a British story," CEP Covid-19 Analyses cepcovid-19-020, Centre for Economic Performance, LSE.
    5. Alexander Daminger, 2021. "Subsidies to Homeownership and Central City Rent," Working Papers 210, Bavarian Graduate Program in Economics (BGPE).
    6. Hilber, Christian A. L. & Mense, Andreas, 2021. "Why have house prices risen so much more than rents in superstar cities?," LSE Research Online Documents on Economics 112668, London School of Economics and Political Science, LSE Library.
    7. Tracey, Belinda & Van Horen, Neeltje, 2021. "The consumption response to borrowing constraints in the mortgage market," Bank of England working papers 919, Bank of England.
    8. Julien Pascal, 2022. "Local employment dynamics and communtig costs," BCL working papers 167, Central Bank of Luxembourg.
    9. Stephen L. Ross & Yuan Wang, 2022. "Mortgage Lenders and the Geographic Concentration of Foreclosures," Working Papers 2022-001, Human Capital and Economic Opportunity Working Group.
    10. Szumilo, Nikodem & Vanino, Enrico, 2021. "Mortgage affordability and entrepreneurship: Evidence from spatial discontinuity in Help-to-Buy equity loans," Journal of Business Venturing, Elsevier, vol. 36(4).
    11. Paul Cheshire & Christian A. L. Hilber, 2024. "Housing and planning," CEP Election Analysis Papers 061, Centre for Economic Performance, LSE.

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    More about this item

    Keywords

    credit constraints; homeownership subsidy; Help to Buy; house prices; construction; housing supply; land use regulation; Fruition Properties (through LSE Advancement) and STICERD;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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