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Finance and the supply of housing quality

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  • Reher, Michael

Abstract

I show how financial intermediaries affect rental housing quality and affordability by supplying real estate investors with financing for quality improvement projects (i.e., renovations). First, I document a historic surge in improvement activity since the Great Recession. Then, using exogenous variation generated by a 2015 change in regulatory capital requirements, I find that a reallocation of bank credit toward improvement projects accounts for 24% of quality improvements since 2015. The shock increases the supply of high-quality apartments and lowers their rent. However, it raises the average apartment’s rent and accounts for 32% of historically high rent growth over 2015–16.

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  • Reher, Michael, 2021. "Finance and the supply of housing quality," Journal of Financial Economics, Elsevier, vol. 142(1), pages 357-376.
    • Handle: RePEc:eee:jfinec:v:142:y:2021:i:1:p:357-376
    DOI: 10.1016/j.jfineco.2021.04.022
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    Cited by:

    1. Gong, Yifan & Yao, Yuxi, 2022. "Demographic changes and the housing market," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    2. Seltzer, Lee, 2024. "Effects of financing constraints on maintenance investments in rent-stabilized apartments," Journal of Financial Intermediation, Elsevier, vol. 59(C).
    3. Stefano Colonnello & Roberto Marfè & Qizhou Xiong, 2021. "Housing Yields," Working Papers 2021:21, Department of Economics, University of Venice "Ca' Foscari", revised 2021.
    4. Seltzer, Lee, 2024. "Effects of financing constraints on maintenance investments in rent-stabilized apartments," Journal of Financial Intermediation, Elsevier, vol. 59(C).

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    More about this item

    Keywords

    Banks; Housing quality; Rent; Financial regulation;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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