Affordable Housing and City Welfare

Jack Favilukis, Pierre Mabille and Stijn Van Nieuwerburgh

No 25906, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E21 E6 G11 G12 G18 H2 H76 R1 R13 R21 R28 R3 R31 R41 R51 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-mac and nep-ure
Note: AP CF EFG PE
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Citations: View citations in EconPapers (18)

Published as Jack Favilukis & Pierre Mabille & Stijn Van Nieuwerburgh, 2023. "Affordable Housing and City Welfare," The Review of Economic Studies, vol 90(1), pages 293-330.

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Related works:
Journal Article: Affordable Housing and City Welfare (2023)
Working Paper: Affordable Housing and City Welfare (2019)
Working Paper: Affordable Housing and City Welfare (2018)
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