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on Housing and Real Estate |
| By: | Aaron Graybill; Kyle Mangum |
| Abstract: | Elevated mortgage rates discourage homeowners from moving, as relocating triggers a reset of mortgage terms — a phenomenon termed “lock-in.” This paper examines whether elevated rates explain recent real estate market tightness: low transaction volumes, low time-on-market, and sustained price growth. Using transaction-level data, we estimate survival models of housing tenures — the probability of sale as a function of tenure and market conditions, including mortgage rate gaps. These estimates quantify missing sellers who have not entered the market because of elevated rates. We then calibrate a search and matching model measuring mortgage rate effects on buyers alongside seller lock-in effects. Results indicate lock-in causes sellers to withdraw, reducing transactions. However, buyers are more sensitive to mortgage rates than sellers are to lock-in, meaning a rate drop would increase sales volumes but not reduce market tightness. |
| Keywords: | mortgage lock-in; search and matching; market tightness; survival models |
| JEL: | R31 G21 E32 |
| Date: | 2026–07–10 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:103512 |
| By: | Robert-Nicoud, Frédéric; Combes, Pierre-Philippe; Duranton, Gilles; Gobillon, Laurent |
| Abstract: | Abstract Canonical urban models fail to jointly account for flexible housing demand, non-degenerate city sizes, and observed urban systems. We introduce a unifying urban framework based on price-independent generalized linear (PIGL) preferences in which housing is a necessity. Non-homothetic housing demand generates income effects that cause urban costs to scale more strongly with population than wages, restoring a unique interior efficient city size under standard assumptions. The framework nests existing canonical models, remains tractable, and is consistent with key empirical regularities, including Zipf’s law and observed housing price elasticities. We also encapsulate a monocentric city model into our framework. |
| Keywords: | Non-homothetic preferences; City size; City size distributions; Urban land use equilibrium |
| JEL: | R12 R13 R21 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21164 |
| By: | Dykstra, Holly; Fernández-Guerrico, Sofia |
| Abstract: | Income-based rents in public housing create an earnings disincentive. We collaborate with a public housing authority to design a behaviorally informed program that returns part of the rent induced by higher earnings to residents. Importantly, the program automatically enrolled households and was explicitly designed to make the increased payoff to working salient. Using a difference-in-differences approach, we estimate that annual household-head earnings rise 17% ($1, 370/year) and public assistance falls 7.5%, with impacts on both intensive and extensive margins. These results provide evidence that an in-work benefit designed for salience can offset the earnings disincentive and affect follow-through labor market behavior. |
| Keywords: | Labor supply; in-work benefits; Salience; public housing |
| JEL: | D91 I38 J22 R38 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21316 |
| By: | Tracey, Belinda; van Horen, Neeltje |
| Abstract: | We examine how easing mortgage borrowing constraints affects entry into homeownership. Using administrative mortgage data and cross-district exposure to the UK Help-to-Buy program, which re-opened the 95\% LTV segment in 2013, we show that first-time buyer purchases rose sharply in more exposed areas. Introducing a new proxy for financial support — based on the gap between observed and predicted down payments — we find that gains were concentrated among households unlikely to have relied on transfers, suggesting a weaker role for family wealth in enabling homeownership. Because these buyers tend to have higher incomes, the composition of homeowners shifted toward higher-income households. |
| Keywords: | Home ownership; Credit constraints; Housing wealth |
| JEL: | D31 E21 G18 G21 R21 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20997 |
| By: | Foulis, Angus; Hazell, Jonathon; Mian, Atif; Tracey, Belinda |
| Abstract: | This paper estimates how rate cuts increase consumption, via debt and asset prices. Using administrative UK data on mortgages and consumption, we exploit the expiry of fixed-rate mortgages to construct six million household-level natural experiments. A 1 pp reduction in mortgage rates raises consumption by 3% in the following 6 months. Using plausibly exogenous variation in how house prices respond to rate cuts, we show that consumption increases mostly because households borrow against higher house prices; lower debt service after rate cuts matters less. These results suggest that in large part, monetary policy affects consumption through asset prices and borrowing. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21243 |
| By: | Katherine Cuff; Nicolas Marceau; Reyhaneh Nikoonejad; Bradley Ruffle |
| Abstract: | We develop a model of monopolistic competition in the rental housing market for low-income households with endogenous tenancy default. Identical suppliers choose the number of rental units to supply and the rental price to charge to maximize expected profits. Potential tenants who differ in their incomes and face an uninsurable income risk choose whether to engage in a costly search for rental housing. If they search and find a rental unit, then they must commit to a rental agreement before their income uncertainty is resolved. Consequently, some tenants may default on their rental payments. We show that tenancy default can explain persistent excess demand in the low-income rental housing market without any government price regulations, and that such excess demand can lead to nonstandard effects of government regulations. We also test whether the excess-demand equilibrium is behaviorally plausible by designing a laboratory experiment. Our experimental results reveal that, with feedback and repetition, the excess-demand equilibrium that requires landlord participants to restrict supply is no more difficult for participants to reach than a market-clearing equilibrium. |
| Keywords: | tenancy default, excess demand, rental housing policies, market experiment |
| JEL: | R21 R31 R38 D41 C91 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12808 |
| By: | Artur Tarassow (Brandenburg University of Applied Sciences); Thomas Theobald (Macroeconomic Policy Institute (IMK)); Carolin Martin (Macroeconomic Policy Institute (IMK)) |
| Abstract: | We analyze macroeconomic determinants of residential building permits in Germany, France, the Netherlands, Belgium, and Austria using monthly data from 2000 to 2024, with selected variables interpolated from quarterly sources. Employing ARDL cointegration methods with bootstrap inference across six nested specifications, we identify two distinct regimes. Germany operates as a “fundamental and supply-side driven†regime where interest rates, construction cost inflation, and the unemployment rate play an important role, while house price momentum and household disposable income are less dominant drivers. France and the Netherlands display “speculative and demand-side driven†regimes dominated by income, and house price momentum, even though there are structurally different reasons for this regime. Belgium occupies an intermediate position. Austria fails to establish cointegration, consistent with a dominant non-profit housing sector. Construction cost inflation, which has accelerated rapidly in recent years, shows the theoretically expected negative sign only for Germany. Dynamic multipliers reveal adjustment periods of 2 to 13 months in most cases which is consistent with a medium-term business cycle frequency for building permits. Our findings demonstrate that housing policies should be country-specific to address heterogeneous transmission channels. |
| Keywords: | Housing supply; Building permits; ARDL modeling; Monetary policy transmission; Construction costs; European housing markets |
| JEL: | R31 E22 E32 E52 C22 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:imk:wpaper:229-2026 |
| By: | Benjamin Keys, Vincent Reina |
| Abstract: | US households face unprecedented challenges related to the high cost of housing. In this paper, we characterize the affordability crisis, assess the primary drivers of unaffordable housing, and offer potential policy solutions. We argue that several distinct housing-market challenges—including financing gaps, local restrictions that make it difficult and/or costly to build, and a lack of an entitlement program—present distinct challenges to both an adequate and an affordable housing supply. Importantly, though, the impact of these features becomes more dramatic during economic downturns. Our current national housing challenges are a product of longstanding structural challenges that were amplified by an unprecedented lack of building after the 2008 financial crisis. As a result, the policy recommendations sit within a broader series of reforms and policy solutions that ensure that housing supply meets demand, and that affordability is not compromised, during all periods of the economic cycle. |
| Keywords: | housing, urban economics |
| Date: | 2025–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:cxx:wpaper:improving-housing-affordability |
| By: | Díaz, Antonia |
| Abstract: | Wealthier, risk-averse buyers pay more to expedite up transactions in competitive search markets. This, coupled with forward-looking intermediaries who hold vacant homes overnight, implies that a credit expansion produces a boom in prices that slowly recedes over time. This boom is due to a combination of two effects. First, search and matching frictions imply that buyers are willing to pay a higher price to trade faster, not only to consume housing services. Second, the fact that intermediaries are forward-looking implies that trading probabilities today depend on the future evolution of prices. Since agents forecast that prices are higher than in the initial steady state, they turn to trading today. Our theory produces a boom in prices that slowly recedes and a gradual rise of homeownership rate. |
| Keywords: | Competitive search; Wealth effects; Housing prices; Credit constraints; Housing supply; Rental housing; Transitional dynamics |
| JEL: | D31 D83 E21 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20900 |
| By: | Manu García; Carlos Garriga |
| Abstract: | Why do first-time buyers face higher mortgage denial rates than those buying a second house? This analysis examines the structural market forces that shape access to credit. |
| Keywords: | homebuyers; mortgage denials; access to credit |
| Date: | 2026–06–23 |
| URL: | https://d.repec.org/n?u=RePEc:fip:l00001:103424 |
| By: | Lawrence F. Katz |
| Abstract: | Experimental and quasi-experimental studies show that childhood neighborhoods have substantial causal impacts on children’s adult earnings and other long-term socioeconomic outcomes. Several market failures are likely to lead to excessive residential segregation by parental income and to an under-supply of mixed-income neighborhoods. Missing markets for opportunity originate in capital market imperfections for borrowing on children’s future earnings, neighbor spillovers, behavioral biases, and housing search frictions. Customized housing mobility services combined with subsidized housing vouchers can help low-income families move to higher-opportunity areas. Place-based policies that create mixed-income neighborhoods appear to increase long-term outcomes for less-advantaged children. |
| JEL: | H0 I3 J1 R0 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35419 |
| By: | Stephanie Kestelman (Harvard University); Rebecca Diamond (Harvard University); John Eric Humphries (Yale University); Kate Pennington (U.S. Census Bureau); Winnie van Dijk (Harvard University); John Voorheis (U.S. Census Bureau) |
| Abstract: | Roughly one-third of U.S. households rent their homes, yet measuring who owns rental property is difficult: ownership is frequently obscured by LLCs, partnerships, and other intermediary entities that separate legal from economic control. We develop a method that traces ownership through administrative recordsÑcombining deeds and property assessments with the Census Bureau's Business Register, IRS Schedule K-1 filings, and SEC filings on REITsÑto identify ultimate owners and construct property portfolios across the full landlord size distribution. Applying the method to 11 large CBSAs, we find that individual landlords own a large majority of rental units, though their share varies meaningfully across markets. We also show that the widely used mailing-address aggregation approach both under- and over-states portfolio size in systematic ways. The method is designed to scale to national coverage and to support measurement of landlord identity, portfolio composition, and ownership concentration in U.S. rental markets. We also discuss the method's current limitations and outline directions for refinement and validation. |
| Date: | 2026–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2531 |
| By: | Cocco, João F.; Naaraayanan, Lakshmi; Tripathy, Jagdish |
| Abstract: | We use administrative data covering the universe of mortgage originations to individual real estate investors in the United Kingdom to study financing outcomes following a large, unanticipated increase in interest rates. Post-shock, originations become more concentrated among specialist lenders, who exhibit lower interest rate pass-through for larger borrowers. To offset these smaller rate increases, they charge higher loan fees, thereby attenuating the impact of higher rates on interest-coverage ratios and facilitating credit. High-frequency evidence from loans on offer show similar responses, indicating that specialist lenders adjust product design to target specific borrower types and, in doing so, reinforce market segmentation. |
| Keywords: | Mortgages; Interest rates; Underwriting; Market segmentation |
| JEL: | D1 G5 R21 E43 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21347 |
| By: | Shawn Berry |
| Abstract: | Deciding where to live involves a complex balance between commuting and moving, as households must weigh housing affordability, transportation expenses, access to workplaces, and social ties. Traditional urban economic theories focus on the balance between housing expenses and commuting costs, while modern studies also consider housing affordability, transportation access, and utility maximization. However, few studies have combined these elements into a clear mathematical model that can be used for both policy analysis and household decision-making. This paper introduces an algebraic model for deciding whether to commute or move, expanding on traditional residential location theories by including direct housing and commuting expenses, income-related affordability limits, indirect social and service access costs, and location-based utility within a single utility-maximization framework. The model uses the common 30% housing affordability rule as a constraint, acknowledging that residential choices are also shaped by social networks, access to institutions, neighborhood ties, and quality-of-life factors. The decision rule derived from the model integrates direct financial costs with weighted social benefits and indirect access costs to assess when moving offers more overall utility than staying put and commuting. Unlike complex discrete-choice, nested-logit, or agent-based models, this framework offers a mathematically clear, understandable, and flexible decision model that can easily be expanded to include more household characteristics, transportation options, or policy factors. The model advances urban economics, migration studies, and housing affordability research by providing a practical analytical tool for assessing residential mobility decisions within financial and behavioral limits. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.31780 |
| By: | Mr. Jean-Jacques Hallaert; Iglika Vassileva |
| Abstract: | Housing affordability is high on the economic, social, and political agenda in Europe. While the economic literature has mostly analyzed the drivers of housing unaffordability, this paper focuses on its consequences, quantifying, at the EU level, its impact on individuals’ well-being as well as its economic and demographic impact. We find that the impact of an increase in housing cost burden is large on housing adequacy as well as on poverty and health. It is somewhat smaller on fertility and labor force participation. |
| Keywords: | Housing Affordability; Housing Availability; Housing Adequacy; Labor Force Participation; Fertility; Poverty; Health; Fiscal Spending; Machine-Learning; housing cost; IMF working papers; housing price; Housing; Income; Disposable income; Housing prices; Europe |
| Date: | 2026–06–19 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/124 |
| By: | Glaeser, Edward; Kirchberger, Martina; Parkhomenko, Andrii |
| Abstract: | This paper discusses the rebuilding of Ukrainian cities. We start by outlining key facts about Ukraine and its cities: (i) the country's population is declining; (ii) there is a shift in demand for housing from east to west; (iii) Kyiv's advantage is growing; (iv) house prices are rising in Kyiv and western cities; (v) Ukraine's cities are slow and congested. We then present a theoretical framework for maximizing the benefits of Ukraine's rebuilding effort to highlight the welfare effects of different allocations of post-war infrastructure. Finally, we consider the cost curve for reconstruction, as determined, in particular, by the cost of materials, labor, the industrial organization of the building industry and public practices in procurement and regulation. We highlight three broad strategies for shifting the cost curve: openness, standardization and investing-in-investing. We conclude by outlining areas for future research. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21086 |