Affordable Housing and City Welfare

87 Pages Posted: 7 Nov 2018 Last revised: 11 Jun 2021

See all articles by Jack Y Favilukis

Jack Y Favilukis

University of British Columbia (UBC) - Division of Finance

Pierre Mabille

INSEAD - Finance

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); ABFER

Multiple version iconThere are 3 versions of this paper

Date Written: June 11, 2021

Abstract

Housing affordability is the main policy challenge for most large cities in the world. Zoning changes, rent control, housing vouchers, and tax credits are the main levers employed by policy makers. How effective are they at combatting the affordability crisis? We build a dynamic stochastic spatial equilibrium model to evaluate the effect of these policies on the well-being of its citizens. The model endogenizes house prices, rents, construction, labor supply, output, income and wealth inequality, the location decisions of households within the city as well as inter-city migration. Its main novel features are risk, risk aversion, and incomplete risk-sharing. We calibrate the model to the New York MSA. Housing affordability policies carry substantial insurance value but affect aggregate housing and labor supply and cause misallocation in labor and housing markets. Housing affordability policies that enhance access to this insurance especially for the neediest households create substantial net welfare gains.

Keywords: Dynamic Spatial Equilibrium, House Prices, Affordable Housing, Rent Control, Zoning, Gentrification, Real Estate Development, New York, Housing Vouchers, Tax Credits, LIHTC

JEL Classification: R10, R20, R30, R40, R51, G11, G12, H41, H70, J61

Suggested Citation

Favilukis, Jack Y and Mabille, Pierre and Van Nieuwerburgh, Stijn, Affordable Housing and City Welfare (June 11, 2021). Columbia Business School Research Paper No. 18-77, Available at SSRN: https://ssrn.com/abstract=3265918 or http://dx.doi.org/10.2139/ssrn.3265918

Jack Y Favilukis

University of British Columbia (UBC) - Division of Finance ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Pierre Mabille

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

HOME PAGE: http://www.pierremabille.com

Stijn Van Nieuwerburgh (Contact Author)

Columbia University Graduate School of Business ( email )

3022 Broadway
Uris Hall 809
New York, NY New York 10027
United States

HOME PAGE: http://https://www0.gsb.columbia.edu/faculty/svannieuwerburgh/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

ABFER ( email )

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1 Business Link
Singapore, 117592
Singapore

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