Affordable Housing and City Welfare

81 Pages Posted: 7 Nov 2018 Last revised: 25 May 2019

See all articles by Jack Y Favilukis

Jack Y Favilukis

University of British Columbia (UBC) - Division of Finance

Pierre Mabille

New York University (NYU) - Leonard N. Stern School of Business

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); New York University Stern School of Business, Department of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: May 24, 2019

Abstract

Housing affordability is the main policy challenge for many large cities in the world. Zoning changes, rent control, housing vouchers, and tax credits are the main levers employed by policy makers. But how effective are they at combatting the affordability crisis? We build a new framework to evaluate the effect of these policies on the well-being of its citizens. It endogenizes house prices, rents, construction, labor supply, output, income and wealth inequality, as well as the location decisions of households. Its main novel features are risk, risk aversion, and incomplete risk-sharing. We calibrate the model to the New York MSA, incorporating current zoning and affordable housing policies. Housing affordability policies carry substantial insurance value but cause misallocation in labor and housing markets. Housing affordability policies that enhance access to this insurance especially for the neediest households create large 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 (May 24, 2019). 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

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 W 4th Street
Suite 9-160
New York, NY 10012
United States

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

New York University Stern School of Business, Department of Finance ( email )

44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States

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