Affordable Housing and City Welfare

88 Pages Posted: 5 Jun 2019 Last revised: 16 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: May 2019

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.

Suggested Citation

Favilukis, Jack Y and Mabille, Pierre and Van Nieuwerburgh, Stijn, Affordable Housing and City Welfare (May 2019). NBER Working Paper No. w25906, Available at SSRN: https://ssrn.com/abstract=3398076

Jack Y Favilukis (Contact Author)

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

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Pierre Mabille

INSEAD - Finance ( email )

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France

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

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business ( email )

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New York, NY New York 10027
United States

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

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

ABFER ( email )

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Singapore

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