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

Abstract

Using variation across metropolitan areas in the US, we show that housing supply constraints have only modestly altered outcomes related to housing affordability—rents, house sizes, lot sizes, and household location choice—relative to their effects on house price growth between 1980 and 2016. We interpret these findings by calibrating a dynamic, spatial equilibrium model in which these outcomes are endogenous. The model quantitatively matches the effects of supply constraints on rents and housing consumption and shows that they are smaller than the effects on house prices because they reflect current housing supply and demand conditions, whereas prices capitalize future rent growth. Thus, we conclude that supply constraints have had smaller effects on housing affordability in the US than is commonly understood, despite their sizable effects on house prices.

Type

Working Paper

Author(s)

Charles Nathanson, Raven Molloy, Andrew Paciorek

Date Published

2021

Citations

Nathanson, Charles, Raven Molloy, and Andrew Paciorek. 2021. Housing Supply and Housing Affordability: Evidence from Rents, Housing Consumption and Household Location.

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