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Ad valorem housing subsidies may reduce house building

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  • Usategui Díaz de Otalora, José María

Abstract

In this paper it is shown that an ad valorem housing subsidy set by a central regulator (or a raise in the ad valorem housing subsidy rate) may reduce the number of houses built in the market and increase the price paid by the buyers of houses. The analysis considers a situation where there is imperfect competition in the housing market and a local regulator that decides on density, or on the number of sites for housing development, and that cares about a combination of the profits of housing developers and the surplus of buyers of houses.

Suggested Citation

  • Usategui Díaz de Otalora, José María, 2008. "Ad valorem housing subsidies may reduce house building," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    • Handle: RePEc:ehu:dfaeii:6683
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    File URL: https://addi.ehu.es/handle/10810/6683
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    References listed on IDEAS

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    1. Nichols, Albert L & Zeckhauser, Richard J, 1982. "Targeting Transfers through Restrictions on Recipients," American Economic Review, American Economic Association, vol. 72(2), pages 372-377, May.
    2. Hanushek, Eric A & Quigley, John M, 1990. "Commercial Land Use Regulation and Local Government Finance," American Economic Review, American Economic Association, vol. 80(2), pages 176-180, May.
    3. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    4. Edgar O. Olsen, 2003. "Housing Programs for Low-Income Households," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 365-442, National Bureau of Economic Research, Inc.
    5. Sinai, Todd & Waldfogel, Joel, 2005. "Do low-income housing subsidies increase the occupied housing stock?," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2137-2164, December.
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