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Research Details

Housing Supply and Housing Affordability: Evidence from Rents, Housing Consumption and Household Location

Abstract

We examine the effects of housing supply constraints on housing affordability, which we define as the rent for one unit of housing services. We measure affordability directly using observed rent, as well as indirectly by examining outcomes affected by affordability including structure sizes, lot sizes and household location choice. Empirically, we find that housing supply constraints have only modest effects on affordability despite their larger effects on city growth and the price to purchase homes. Calibration of a dynamic, spatial equilibrium model shows that effects on outcomes related to affordability are smaller than effects on house prices because affordability reflects current housing supply and demand conditions, whereas the price to purchase a home capitalizes future rent growth and therefore reflects expected supply conditions. We conclude that supply constraints have had smaller effects on housing affordability in the US than is commonly understood, despite their sizable effects on the purchase prices of homes.

Type

Working Paper

Author(s)

Charles Nathanson, Raven Molloy, Andrew Paciorek

Date Published

2022

Citations

Nathanson, Charles, Raven Molloy, and Andrew Paciorek. 2022. Housing Supply and Housing Affordability: Evidence from Rents, Housing Consumption and Household Location.

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