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Affordable Housing and City Welfare

Author

Listed:
  • Jack Favilukis
  • Pierre Mabille

    (New York University)

  • Stijn Van Nieuwerburgh

    (New York University)

Abstract

Housing affordability has become one of the main policy challenges for the major cities of the world. Two key policy levers are zoning and rent control policies. We build a new dynamic equilibrium asset pricing model to evaluate the implications of such policies for house prices, rents, production and income, residential construction, income and wealth inequality, as well as the spatial distribution of households within the city. We calibrate the model to New York City, incorporating current zoning and rent control systems. Our model suggests large welfare gains from relaxing zoning regulations in Manhattan, and more modest gains from reducing the size of the rent control program. The former policy is progressive and a Pareto improvement, while rent control reform is regressive in nature and hurts the current beneficiaries.

Suggested Citation

  • Jack Favilukis & Pierre Mabille & Stijn Van Nieuwerburgh, 2018. "Affordable Housing and City Welfare," 2018 Meeting Papers 867, Society for Economic Dynamics.
    • Handle: RePEc:red:sed018:867
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy

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