Abstract
We examine the effects of housing supply constraints on housing affordability, which we measure directly using quality-adjusted rent as well as indirectly using structure sizes, lot sizes and household location choices. Empirically, we find that housing supply constraints have only modest effects on rents and housing consumption despite their larger effects on city growth and the price to purchase homes. Calibration of a dynamic, spatial equilibrium model shows that supply constraints increase price-rent ratios because investors expect future rents to increase more with expected demand growth. Because rent is what matters for affordability, supply constraints have reduced affordability less than is commonly understood despite their sizable effects on the purchase prices of homes.
Original language | English (US) |
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Article number | 103427 |
Journal | Journal of Urban Economics |
Volume | 129 |
DOIs | |
State | Published - May 2022 |
Funding
We thank the editor (Nate Baum-Snow), referees, and seminar and conference participants for helpful comments. Nathanson thanks the Guthrie Center for Real Estate Research (which did not review this paper) for financial support. The views expressed in this paper represent the views of the authors and do not indicate concurrence either by other members of the Board's staff or by the Board of Governors. The authors have no relevant interests to declare.
Keywords
- Affordability
- Housing supply
ASJC Scopus subject areas
- Economics and Econometrics
- Urban Studies