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Spillover effects from new housing supply

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  • Gonzalez Pampillon, Nicolas

Abstract

I estimate spillovers from new housing supply on house prices, crime rates, and household income. To estimate these effects, I use exogenous variation in supply induced by a housing subsidy implemented in middle-income neighborhoods in the city of Montevideo. The program incentivized residential development through tax breaks that led to sizable investments in certain neighborhoods. I exploit the spatial structure of the scheme to identify the externalities and find clear evidence of spillovers from new supply on house prices, with prices increasing between 12 and 17%. Property crime rates only decreased in the short term, while there is evidence of an increase in household income, suggesting that the neighborhood income mix responded to the supply expansion. Increasing supply appears to revitalize neighborhoods, but these effects also reduce housing affordability.

Suggested Citation

  • Gonzalez Pampillon, Nicolas, 2019. "Spillover effects from new housing supply," LSE Research Online Documents on Economics 121833, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:121833
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    File URL: http://eprints.lse.ac.uk/121833/
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    References listed on IDEAS

    as
    1. Ooi, Joseph T.L. & Le, Thao T.T., 2013. "The spillover effects of infill developments on local housing prices," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 850-861.
    2. Rebecca Diamond & Tim McQuade, 2019. "Who Wants Affordable Housing in Their Backyard? An Equilibrium Analysis of Low-Income Property Development," Journal of Political Economy, University of Chicago Press, vol. 127(3), pages 1063-1117.
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    More about this item

    Keywords

    housing supply; house prices; neighborhood change; crime; difference-in-differences; housing policies;
    All these keywords.

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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