Extending the real option framework to analyse the economic effects of inclusionary housing policies in different types of markets

Keener Hughen and Dustin Read

ERES from European Real Estate Society (ERES)

Abstract: Inclusionary housing policies enacted by municipal governments rely on a combination of legal mandates and economic incentives to encourage residential real estate developers to include affordable housing units in otherwise market rate projects. Although these regulations provide a means of stimulating the production of mixed-income housing in parts of a community where it would not otherwise exist, they may also slow development activity and put upward pressure on the price of market rate units if a financial burden is imposed on the private sector. The following paper extends the real option framework to explore the effects of inclusionary housing policies on housing prices and development timing. Overall, the results demonstrate that both market conditions and consumer perceptions about mixed-income housing can influence the economic outcomes of these affordable housing initiatives.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2012-01-01
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