Affordability of Owner-Occupied Housing across US Cities

Rebecca Diamond and William Diamond

AEA Papers and Proceedings, 2024, vol. 114, 340-45

Abstract: This paper compares the affordability of owner-occupied housing across US cities. We apply a new method for imputing the rental value of owner-occupied housing developed in Diamond and Diamond (2024) that accounts for unobserved house quality. On average, the rental value of owner-occupied housing is 3.2 percent above that implied by standard hedonic methods. Hedonic methods overestimate rental value of owner-occupied housing in the most regulated cities and sharply underestimate it in the least regulated cities. We provide suggestive evidence that this heterogeneity reflects misallocation, where high-quality housing stock cannot be built in the most desirable parts of regulated cities.

JEL-codes: G51 R21 R31 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/pandp.20241045

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