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Research Details

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

Abstract

We show that housing supply constraints have only modest effects on housing affordability—which we define as the price of housing services—despite their larger effects on house prices and city growth. We measure affordability directly using rents, as well as indirectly by examining structure sizes, lot sizes, and household location choice. We interpret these empirical 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. 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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