When Redevelopment Transforms the Housing Stock: Carrot & Stick Policy and the Affordability Puzzle

Daniel Lebret, Crocker H. Liu and Maxence Valentin
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Daniel Lebret: Cornell University
Crocker H. Liu: Cornell University
Maxence Valentin: Department of Management, Technology, and Economics, ETH Zurich

No 26/409, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: In mature cities, housing supply expands primarily through redevelopment of existing struc tures. We develop a forward-looking spatial equilibrium model in which developers choose whether, when, and how intensively to redevelop individual parcels. Calibrated to New York City, the model shows that policies that incentivize development raise average rents because new construction replaces lower-rent units with higher-rent ones. In a representative upzon ing, supply rises 1.4 percent while average rent rises 1.3 percent. Tax incentives accelerate redevelopment while density bonuses increase height but often delay redevelopment. Affordability mandates crowd out market-rate construction, with incidence determined by the paired incentive.

Keywords: Real Estate Development; Land-use regulations; Tax credits; Affordable housing; Capital investment under uncertainty; Housing Policy Incidence (search for similar items in EconPapers)
JEL-codes: H22 H32 R31 R38 R52 (search for similar items in EconPapers)
Pages: 110 pages
Date: 2026-09
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