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Working Paper
The Effect of Second-Generation Rent Controls: New Evidence from Catalonia
Catalonia enacted a second-generation rental cap policy that affected only some municipalities and, within those, only units with prices above their “reference” price. We show that, as intended, the policy led to a reduction in rental prices, but with price increases at the bottom and price declines at the top of the distribution. The policy also affected supply, with exit at the top which is not compensated by entry at the bottom. We show that a model with quality differences in rental units rationalizes the empirical facts and allows us to compute the welfare consequences of the policy.
Working Paper
Urban Renewal and Inequality: Evidence from Chicago’s Public Housing Demolitions
This paper studies one of the largest spatially targeted redevelopment efforts implemented in the United States: public housing demolitions sponsored by the HOPE VI program. Focusing on Chicago, we study welfare and racial disparities in the impacts of demolitions using a structural model that features a rich set of equilibrium responses. Our results indicate that demolitions had notably heterogeneous effects where welfare decreased for low-income minority households and increased for White households. Counterfactual simulations explore how housing policy mitigates negative effects of ...
Working Paper
Financing Affordable and Sustainable Homeownership with Fixed-COFI Mortgages
The 30-year fixed-rate fully amortizing mortgage (or ?traditional fixed-rate mortgage?) was a substantial innovation when first developed during the Great Depression. However, it has three major flaws. First, because homeowner equity accumulates slowly during the first decade, homeowners are essentially renting their homes from lenders. With this sluggish equity accumulation, many lenders require large down payments. Second, in each monthly mortgage payment, homeowners substantially compensate capital markets investors for the ability to prepay. The homeowners might have better uses for this ...
Working Paper
The Effect of Interest Rates on Home Buying : Evidence from a Discontinuity in Mortgage Insurance Premiums
We study the effect of interest rates on the housing market by taking advantage of a sudden and unexpected price change in a large government mortgage program. The Federal Housing Administration (FHA) insures most mortgages to lower-downpayment, lower credit score borrowers, including a majority of first-time homebuyers. The FHA charges borrowers an annual mortgage insurance premium (MIP), and in January, 2015 the FHA abruptly reduced the MIP, and thus FHA borrowers? effective interest rate, by 50 basis points. Using a regression discontinuity design, we find that the MIP reduction increased ...
Working Paper
Place-Based Consequences of Person-Based Transfer: Evidence from Recessions
This paper studies how government transfers respond to changes in local economic activity that emerge during recessions. Local labor markets that experience greater employment losses during recessions face persistent relative decreases in per capita earnings. However, these areas also experience persistent increases in per capita transfers, which offset 16 percent of the earnings loss on average. The increase in transfers is driven by unemployment insurance in the short run, and medical, retirement, and disability transfers in the long run. Our results show that nominally place-neutral ...
Working Paper
Targeted Relief: Geography and Timing of Emergency Rental Assistance
In response to the COVID-19 pandemic, Congress established the Emergency Rental Assistance (ERA) program, which provided nearly $45 billion to prevent evictions and increase housing stability. We provide new evidence on the implementation of ERA by examining the fine-grained geographic distribution of ERA funds and the timing of ERA expenditures by state and local governments. Using administrative data on ERA transactions, we find that ERA sent more funds per renting household to census tracts with higher pre-pandemic eviction filing rates, higher poverty rates, higher shares of Black ...
Working Paper
Housing Supply and Affordability: Evidence from Rents, Housing Consumption and Household Location
We examine how housing supply constraints affect housing affordability, which we define as the quality-adjusted price of housing services. In our dynamic model, supply constraints increase the price of housing services by only half has much as the purchase price of a home, since the purchase price responds to expected future increases in rent as well as contemporaneous rent increases. Households respond to changes in the price of housing services by altering their housing consumption and location choices, but only by a small amount. We evaluate these predictions using common measures of ...
Journal Article
Pricing government credit: a new method for determining government credit risk exposure
A growing debate centers on how best to recognize (and price) government interventions in the capital markets. This study applies a method for estimating and valuing the government?s exposure to credit risk through its loan and guarantee programs. The authors use the mortgage portfolios of Fannie Mae and Freddie Mac as examples of how policymakers could employ this method in pricing the government?s program credit risk. Building on the cost of capital approach, the method captures each program?s possible tail loss over and above its expected value. The authors then use a capital allocation ...
Working Paper
Do restrictions on home equity extraction contribute to lower mortgage defaults? evidence from a policy discontinuity at the Texas border
Texas is the only US state that limits home equity borrowing to 80 percent of home value. This paper exploits this policy discontinuity around the Texas? interstate borders and uses a multidimensional regression discontinuity design framework to find that limits on home equity borrowing in Texas lowered the likelihood of mortgage default by about 1 percentage point for all mortgages and 2-4 percentage points for nonprime mortgages. Estimated nonprime mortgage default hazards within 25 to 100 miles on either side of the Texas? border are about 15 percent smaller as one crosses into Texas.
Working Paper
Foreclosure Externalities and Vacant Property Registration Ordinances
This paper tests the effectiveness of vacant property registration ordinances (VPROs) in reducing negative externalities from foreclosures. VPROs were widely adopted by local governments across the United States during the foreclosure crisis and facilitated the monitoring and enforcement of existing property maintenance laws. We implement a border discontinuity design combined with a triple-difference specification to overcome policy endogeneity concerns, and we find that the enactment of VPROs in Florida more than halved the negative externality from foreclosure. This finding is robust to a ...