Does space natter? The case of the housing expenditure cap

Yifan Gong and Charles Leung

MPRA Paper from University Library of Munich, Germany

Abstract: In our evaluation of the housing expenditure share cap, a macroprudential policy, we discover the importance of modeling space. The spatial considerations allow households to sort into segmented housing markets based on income. Our model generates the observed negative relationship between housing expenditure share and income. More importantly, the cap policy causes a more considerable reduction in housing costs for low-income families than for high-income families in a spatial model. Depending on the assumption of households' preference, this mechanism leads to a minor increase or even a modest decrease in welfare inequality in a spatial model than in a spaceless model.

Keywords: housing expenditure share; monocentric model of a city; spatial sorting; welfare inequality (search for similar items in EconPapers)
JEL-codes: D04 R20 R30 (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-ure
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Related works:
Journal Article: Does space matter? The case of the housing expenditure cap (2024)
Working Paper: Does Space Matter? The Case of the Housing Expenditure Cap (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:118686

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