Conference Agenda

Overview and details of the sessions of this online conference.

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Session Overview
L05: Housing
Friday, 20/Aug/2021:
2:15pm - 3:45pm

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2:15pm - 2:37pm

Market Rate Housing Construction In Urban Neighborhoods

Erlend Eide Bø, Stefan Leknes

Statistics Norway, Norway

Many urban neighborhoods are characterized by soaring housing prices and gentrification. Can construction of market rate residential housing be a remedy? New housing increases local supply, and could lead to falling prices if local demand is limited. However, new housing generally has higher standard than older housing and may therefore attract wealthier residents, which could increase the prices of existing housing through positive neighborhood externalities. Using detailed housing data from Norway's capital Oslo, we study how housing prices and residential composition of existing housing are affected by market rate construction nearby. We deal with endogeneous location of new constructions by instrumenting with available space for development and controlling for micro neighborhoods. We find that the effects on housing prices and incomes of residents are negative, but small, suggesting that the supply effect is larger than any positive neighborhood effect.

Bø-Market Rate Housing Construction In Urban Neighborhoods-543.pdf

2:37pm - 3:00pm

Housing Affordability and Transaction Tax Subsidies

Anastasia Girshina2, Francois Koulischer1, Ulf von Lilienfeld1

1University of Luxembourg, Luxembourg; 2Stockholm School of Economics

House prices have increased faster than average income in many countries over the last decade, raising concerns on the affordability of housing. We study the impact of transaction taxes on the real estate market and the effectiveness of tax subsidies to make housing more affordable. We show how the demand and supply elasticities for housing determine the price impact of tax subsidies and the distribution of gains between buyers and sellers. We then use data on all real estate transactions in Luxembourg from 2007 to 2018 to estimate the elasticity of housing supply and demand. For identification, we exploit discontinuities in the transaction tax schedule as well as rules on tax subsidies for new constructions. Our estimates suggest that the elasticity of house prices to transaction taxes is 0.27, so buyers capture a large part of the surplus from the subsidies.

Girshina-Housing Affordability and Transaction Tax Subsidies-368.pdf

3:00pm - 3:22pm

The Virus That Devastated Tourism: the Impact of Covid-19 on the Housing Market

João Pereira dos Santos, Susana Peralta, Duarte Gonçalves, Mafalda Batalha

Nova School of Business and Economics, Portugal

We estimate the impact of the sudden and sharp decrease in tourism caused by the pandemic on housing rental and sales in Lisbon, a tourist-intensive capital with a high density of short-term rentals. We use a panel that spans the 24 civil parishes between the third quarter of 2018 and the third quarter of 2020. We estimate difference-in-differences specifications, with both a binary treatmentand a treatment intensity relying on the pre-pandemic intensity of short-term rentals in the civil parishes. Our results are robust to an IV that deals with selection into treatment concerns, and to the inclusion of the second largest city of the country. We show that in the long-term rental market, prices decrease 4.1%, while quantities increase 20% in the treated areas vis-à-vis comparison ones. We also find evidence of an incremental negative impact onsale prices of 4.8% in treated areas, with no effect on quantities.

Pereira dos Santos-The Virus That Devastated Tourism-440.pdf

3:22pm - 3:45pm

Intrinsic Real Option Value: Empirical Evidence from Commercial Real Estate Investors

Simon Camilo Büchler1, Alex van de Minne2, Olivier Schoeni3

1Massachusetts Institute of Technology; 2University of Connecticut; 3Laval University

We investigate how local information externalities affect investments in tangible durable assets via real options. Using geocoded transaction-level data on US commercial properties from 2000 to 2018, we find that investors have a higher propensity to invest in a property for immediate redevelopment when its capital intensity and type of commercial activity differ from those of recently built nearby properties. Information externalities affect 'buy-to-redevelop' investment strategies as much as the asset capital depreciation -- the main determinant of real option exercise highlighted in the literature -- and can increase up to 30 percent the investors' willingness to pay to invest in the property.

Büchler-Intrinsic Real Option Value-196.pdf

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