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Assistant Professor of Finance
Dynamic Spatial Equilibrium; House Prices; Affordable Housing; Rent Regulation; Zoning; Housing Vouchers; Tax Credits; Gentrification; Migration; JEL Classification: R10; R20; R30; R40; R51; G11; G12; H41; H70; J61
Favilukis J., Mabille P., Van Nieuwerburgh S. (2023). Affordable Housing and City Welfare Review of Economic Studies, 90(1), pp. 293-330.
Housing affordability is the main policy challenge for most large cities in the world. Zoning changes, rent control, housing vouchers, and tax credits are the main levers employed by policy makers. How effective are they at combatting the affordability crisis?The authors build a dynamic stochastic spatial equilibrium model to evaluate the effect of these policies on the well-being of its citizens. The model endogenizes house prices, rents, construction, labor supply, output, income and wealth inequality, the location decisions of households within the city as well as inter-city migration. Its main novel features are risk, risk aversion, and incomplete risk-sharing. The authors calibrate the model to the New York MSA.Housing affordability policies carry substantial insurance value but affect aggregate housing and labor supply and cause misallocation in labor and housing markets. Housing affordability policies that enhance access to this insurance especially for the neediest households create substantial net welfare gains.