FREE ELECTRONIC LIBRARY - Theses, dissertations, documentation

Pages:     | 1 |   ...   | 6 | 7 || 9 | 10 |   ...   | 34 |

«reNtal HousiNg Policy iN tHe uNited states Volume 13, Number 2 • 2011 U.S. Department of Housing and Urban Development | Office of Policy ...»

-- [ Page 8 ] --

Finally, I turn to social capital investments, which I define as investments that affect the quality of the neighborhood but not the neighborhood’s structure. One way to view these investments is that they require time but not money and only the residents can make them. These investments may also create externalities. In general, equation (1) continues to hold and I should expect to see more investments from homeowners than from renters, both because homeowners internalize the benefits of future price increases and because they do not lose from increases in rents. These increased investments provide one justification for the correlations between homeownership and social capital found by DiPasquale and Glaeser (1999) and others.

∞ Another question is whether structure or individual characteristics will connect with these ∞ investments. For example, it is natural∞to assume that both benefits and the costs of investment are a function of the size of∞the building. It might be easier to connect with others in large, dense ∞ structures, in which case T might be declining with U. Alternatively, the benefits of social capital ∞ might be lower or higher in denser areas. Social capital may be less valuable if people are more ∞

–  –  –

Proposition 4:

(a) Holding building structure constant, investment in social capital is always higher in owneroccupied than in rental properties, and if f (m) is uniform, then the increased investment associated with owner-occupancy is rising with building size (U) if and only if the time costs of investing in social capital decline with building size ( ).

(b) If renters occupy larger buildings, then homeowners may invest less in social capital if the time costs of investing in social capital decline sufficiently with building size (that is, if is sufficiently negative).

–  –  –

The author acknowledges the Taubman Center for State and Local Government for supporting this work. Kristina Tobio provided superb research assistance.

–  –  –

References Albouy, David. 2009 (August). “The Unequal Geographic Burden of Federal Taxation,” Journal of Political Economy 117 (4): 635–667.

Ciccone, Antonio, and Robert E. Hall. 1996. “Productivity and the Density of Economic Activity,” American Economic Review 86 (1): 54–70.

Coulson, N. Edward, and Herman Li. 2010. “Measuring the External Benefits of Homeownership.” Paper presented at the 46th Annual AREUEA Conference, Denver, Colorado.

DiPasquale, Denise, and Edward L. Glaeser. 1999 (March). “Incentives and Social Capital: Are Homeowners Better Citizens?” Journal of Urban Economics 45 (2): 354–384.

Frankena, Mark. 1975. “Alternative Models of Rent Control,” Urban Studies 12 (3): 303–308.

Glaeser, Edward L. 2010 (Spring). “Preservation Follies,” City Journal 20 (2): 62–67.

Glaeser, Edward L., and Joshua D. Gottlieb. 2008. “The Economics of Place-Making Policies,” Brookings Papers on Economic Activity: 155–239.

———. 2006. “Urban Resurgence and the Consumer City,” Urban Studies 43 (8): 1275–1299.

Glaeser, Edward L., and Joseph Gyourko. 2008. Rethinking Federal Housing Policy. Washington, DC: The AEI Press.

———. 2002 (Fall). “Zoning’s Steep Price,” Regulation 25 (3): 24–30.

Glaeser, Edward L., Joseph Gyourko, and Raven Saks. 2005. “Why Is Manhattan So Expensive?

Regulation and the Rise in Housing Prices,” The Journal of Law and Economics 48 (2): 331–369.

Glaeser, Edward L., and Matthew E. Kahn. 2010 (May). “The Greenness of Cities: Carbon Dioxide Emissions and Urban Development,” Journal of Urban Economics 67 (3): 404–418.

Glaeser, Edward L., Matthew E. Kahn, and Jordon Rappaport. 2008. “Why Do the Poor Live in Cities? The Role of Public Transportation,” Journal of Urban Economics 63 (1): 1–24.

Glaeser, Edward L., Jenny Schuetz, and Bryce Ward. 2006. Regulation and the Rise of Housing Prices in Greater Boston. Cambridge, MA: Harvard University, Rappaport Institute for Greater Boston;

Boston, MA: Pioneer Institute for Public Policy Research.

Glaeser, Edward L., and Jesse M. Shapiro. 2003. “The Benefits of the Home Mortgage Interest Deduction.” NBER chapters in Tax Policy and the Economy, Vol. 17, edited by James M. Poterba.

Cambridge, MA: National Bureau of Economic Research: 37–82.

Glaeser, Edward L., and Kristina Tobio. 2008. “The Rise of the Sunbelt,” Southern Economic Journal 74 (3): 610–643.

Green, Richard K., and Michelle J. White. 1997. “Measuring the Benefits of Homeowning: Effects on Children,” Journal of Urban Economics 41 (3): 441–461.

–  –  –

Grossman, Sanford J., and Oliver D. Hart. 1986 (August). “The Costs and Benefits of Ownership:

A Theory of Vertical and Lateral Integration,” Journal of Political Economy 94 (4): 691–719.

Gyourko, Joseph. 2009. “Housing Supply,” Annual Review of Economics 1: 295–318.

Gyourko, Joseph E., Albert Saiz, and Anita A. Summers. 2007. A New Measure of the Local Regulatory Environment for Housing Markets: The Wharton Residential Land Use Regulatory Index. Working paper no. 558. University of Pennsylvania: Wharton Real Estate Center.

Henderson, J. Vernon, and Yannis M. Ioannides. 1989. “Dynamic Aspects of Consumer Decisions in Housing Markets,” Journal of Urban Economics 26: 212–230.

Katz, Lawrence, and Kenneth T. Rosen. 1987. “The Interjurisdictional Effects of Growth Controls on Housing Prices,” Journal of Law and Economics 30 (1): 149–160.

Klein, Benjamin. 2006. “The Economic Lessons of Fisher Body-General Motors.” University of California, Los Angeles mimeograph.

Klein, Benjamin, Robert G. Crawford, and Armen A. Alchian. 1978 (October). “Vertical Integration,

Appropriable Rents, and the Competitive Contracting Process,” Journal of Law and Economics 21 (2):


Luttmer, Erzo F.P. 2001. “Group Loyalty and the Taste for Redistribution,” Journal of Political Economy 109 (3): 500–528.

Malpezzi, Stephen. 1996. “Housing Prices, Externalities, and Regulation in U.S. Metropolitan Areas,” Journal of Housing Research 7 (2): 209–241.

Nandwa, Boaz, and Laudo M. Ogura. 2010 (April). “Do Urban Growth Controls Slow Down Regional Economic Growth?” Available at Social Science Research Network: http://ssrn.com/ abstract=1583646.

Poterba, James. 1984. “Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach,” Quarterly Journal of Economics 99 (4): 729–752.

Poterba, James, and Todd Sinai. 2008. “Tax Expenditures for Owner-Occupied Housing: Deductions for Property Taxes and Mortgage Interest and the Exclusion of Imputed Rental Income,” American Economic Review 98 (2): 84–89.

Saiz, Albert. 2010 (August). “The Geographic Determinants of Housing Supply,” Quarterly Journal of Economics 125 (3): 1253–1296.

Schuetz, Jenny. 2008. “Guarding the Town Walls: Mechanisms and Motives for Restricting Multifamily Housing in Massachusetts,” Real Estate Economics 36 (3): 555–586.

Shilling, James D., C.F. Sirmans, and Jonathan F. Dombrow. 1991 (December). “Measuring Depreciation in Single-Family Rental and Owner-Occupied Housing,” Journal of Housing Economics 1 (4):


–  –  –

Abstract The United States has long exhibited enthusiasm for homeownership. The converse of

this is that it has tended to neglect rental housing. This article seeks to do the following:

(1) explain why rental housing is desirable; (2) lay out the policies that favor owneroccupied housing; (3) discuss current subsidy programs for rental housing, with particular emphasis on programs that are not simply legacies of past policy; and (4) examine how these programs might be improved or reformed. It argues that in a second-best world of restrictive zoning and preferences for ownership, rental subsidies may be justified on both equity and efficiency grounds.

Introduction If anything shows how research and policy have neglected rental housing, it is a search of the words “rental housing” on scholar.google.com. Of the 10 most cited studies on this issue, the youngest is 10 years old, 5 are from the 1980s, and 4 are from the 1970s. And it is not as if more recent papers will catch up soon—the 10th most cited paper has been cited only 34 times.

Yet rental housing is a big deal. The 2007 American Housing Survey (AHS) shows that 35 million households lived in rental housing in that year, housing 81 million people. The events of the past 2 years have made renter housing more important, because many households that were foreclosed upon have been forced to move into rental housing. For mobile people who do not want to bear the fixed costs of owning and busy people who do not want to bear the management cost of owning, rental housing is an important option.

The neglect of rental housing is the natural product of America’s obsession with owner-occupied

housing. This obsession goes back at least as far as de Tocqueville (de Tocqueville, 1835: 231):

Nations are less disposed to make revolutions in proportion as personal property is augmented and distributed amongst them, and as the number of those possessing it increases.

–  –  –

The reverse of the American embrace of owner housing has been hostility toward rental housing in general and apartments in particular.

This article argues that in a second-best world, one in which the federal government provides substantial benefits to owners and local zoning is often hostile to renters, rental subsidies may be appropriate on both equity and efficiency grounds.

Not all rental subsidies are created equal, however. Rent control is inefficient and often inequitable.

Tax credits may encourage low-rent housing in places it is least needed and may be very “leaky”;

that is, a large share of the subsidy does not find its way to renters. The Section 8 Housing Choice Voucher Program (vouchers) provides the most promising form of rental assistance, but, because it is not an entitlement, its may produce perverse results.

This article seeks to do the following: (1) explain why rental housing is desirable; (2) lay out the policies that favor owner-occupied housing; (3) discuss current subsidy programs for rental housing, with a particular emphasis on programs that are not simply legacies of past policy; and (4) examine how these programs might be improved or reformed.

Why Rental Housing Is Desirable Rental housing can be better for some households than owner-occupied housing for a few reasons.

Rental housing—

• Is compatible with labor mobility.

• Allows for households that wish to invest in something other than housing to do so.

• Generally allows for the provision of safe, sanitary housing while reducing the risk and perhaps the cash-flow cost of such housing to dwellers.

This section discusses each of these points briefly. When making a decision between owning and renting, a household might perform a financial calculation regarding which form of tenure minimizes housing costs. Although housing costs are generally addressed in terms of cash-flow costs (discussed later in the article), they also need to be addressed in terms of fixed costs––the fixed costs involved in purchasing a home are inevitably higher than they are for renting.

The reason for this disparity is the nature of the transaction: owners need to know their tenure is secure in perpetuity (or something close to it), and lenders that finance owner-occupied housing need to perform due diligence to make sure their loans are well collateralized. This due diligence imposes fixed costs in the forms of downpayment, title insurance, and loan origination costs on owners that do not exist for renters. The buyer-seller transaction is also more likely to go through a broker than is a landlord-renter transaction.1 Moreover, homeowners bear these types of fixed costs both when purchasing and selling a house. These costs produce a friction that is much larger than in the rental market.2 Brokers are usually involved in commercial real estate leases, but are less involved in apartment/house leases.

A landlord must perform due diligence as well, but not to the same degree as a lender or a title insurance company. If a landlord makes a mistake, he or she loses a few months’ rent; if a lender or title insurance company makes a mistake, their potential losses are considerably larger.

–  –  –

Homeownership is often sold as a method that enables households—particularly low-income households––to accumulate wealth. This argument has some appeal, because an amortizing mortgage allows households to save and consume simultaneously.

Ownership, however, is surely not the only mechanism available for the poor to begin wealth accumulation. To the extent homebuyers must place equity into a house they will purchase (and loans with 100-percent loan-to-value ratios will be absent for awhile), they will have fewer savings to invest elsewhere. This absence of saving for other investment is not necessarily optimal for either households or the broader economy. Scholars such as Mills (1987), Hendershott (1997), and Taylor (1998) have argued that capital that has flowed out of plant and equipment and into housing has cost the United States productivity and, therefore, Gross Domestic Product.

Finally, regarding cash-flow affordability, consider that owners and renters both pay rent—the difference for renters is that the amount they pay is transparent, whereas, for owners, it is not; hence, for owners, it is called “imputed rent.” In equilibrium, however, the marginal renter must pay the same rent for a house of a particular quality as the marginal owner. This equilibrium condition helps explain why the cash-flow cost of renting is likely lower for renters than it is for owners.

Consider two dwelling units that are identical, except for the tenure of their residents. From the perspective of the landlord, she must earn a total return that is equal to the opportunity cost of her capital (OCC), or the amount she could earn on an investment with comparable risk to housing.

Pages:     | 1 |   ...   | 6 | 7 || 9 | 10 |   ...   | 34 |

Similar works:

«European Commission SOCIAL EXPERIMENTATION A methodological guide for policy makers Written by J-Pal Europe At the request of Directorate General for Employment, Social Affairs and Inclusion Version for the Ministerial conference “Innovative responses to the social impact of the crisis” organised by the Polish Presidency of the European Union – Wrocław, 26 September 2011 http://ec.europa.eu/social/innovationconference empl-innovation@ec.europa.eu The principle of social experimentation...»

«A Liberal Perspective: The Role of Interest Groups in US Foreign Policy Towards Iran Mirijam Koch Abstract: This research seeks to analyze the impact of interest groups in US foreign policy within US-Iranian relations and answer the question why some interest groups are more successful than others. This allows the investigation of policy decisions and US strategy in regard to Iran as a whole. Coming from the liberalist approach of Moravcsik and Risse this study focuses on domestic structures...»

«Evelyn Waugh That's What's Wrong with England Patrick Adcock Professor of English Abstract Evelyn Waugh, dead for over thirty years, is a social critic who can still stir violent controversy. His novels and nonfiction books, stylistically brilliant, take no prisoners. He satirizes the working class and the nonwhite races just as savagely as he satirizes everybody else. The Catholicism in his novels, especially in scenes which reveal the Hand of God directing human affairs, runs counter to...»

«NOT IN THE FINE PRINT: RECOMMENDED CHANGES TO LIFE INSURANCE POLICY DISCLOSURES REGARDING RETAINED ASSET ACCOUNTS MICHAEL A. BARRESE* I. INTRODUCTION Tom is the primary breadwinner of his family. In order to protect his wife and children financially in the event that he passes away, he goes online and researches life insurance policies. After becoming familiar with the different forms of life insurance, Tom purchases a $250,000 life insurance policy from a large insurance company. When he...»

«The administrative working procedures of smaller states in the decision-making process of the EU by Dr. Baldur Thorhallsson University of Iceland e-mail: baldurt@hi.is Abstract This paper argues that the size and characteristics of administrations is a significant variable in explaining the behaviour of smaller states in the decision-making process of the European Union (EU) in the areas of the Common Agricultural Policy (CAP) and the Regional Policy. It argues that administrative working...»

«X Congreso Internacional del CLAD sobre la Reforma del Estado y de la Administración Pública, Santiago, Chile, 18 21 Oct. 2005 Concepts and theories of horizontal policy management B. Guy Peters Department of Political Science University of Pittsburgh Pittsburgh, PA Coordination and coherence are familiar themes in the discussion of shortcomings of public administration and public policy. Governments have long sought to discover means of making the policies adopted in one department or agency...»

«The Boys and Girls Club of Ottawa Volunteer Policy & Procedure Manual Table of Contents Section 1 1.0 INTRODUCTION..4 1.1 The Boys and Girls Club of Ottawa Mission Statement Section 2 2.0 TYPES OF VOLUNTEERS..4 2.1 The Boys and Girls Club of OttawaClubhouse Volunteer/ Student Placement 2.1.2 The Boys and Girls Club of OttawaClubhouse Volunteer (Youth) 2.1.3 The Boys and Girls Club of OttawaSpecial Events Volunteer 2.1.4 The Boys and Girls Club of OttawaAdministrative Support 2.1.5 The Boys and...»

«Public Policy Formulation Through Non Moderated Crowdsourcing in Social Media Yannis Charalabidis1, Anna Triantafillou2, Vangelis Karkaletsis3, Euripidis Loukis1 University of the Aegean, Information and Communication Systems Engineering Dept., Gorgyras and Palama Str., 83200 Karlovassi, Samos, Greece {yannisx, eloukis}@aegean.gr Athens Technology Center, Rizariou Str. 10, 15233 Halandri, Athens, Greece a.triantafillou@atc.gr National Center for Scientific Research Demokritos, Institute of...»

«Chapter 2 Personal Identity and Liberal Political Theory Introduction to Communitarian Objections to Liberal Political Theory The purpose of this book is to defend a Rawlsian conception of political identity. As explained in Chap. 1, I focus on objections to Rawls’s liberal political theory according to which it relies on an unacceptable conception of personal identity. My concerns are broader than merely defending Rawls, but looking at this kind of objection to Rawls and his responses helps...»

«September 2003 Paper on some policy issues before the Office of the Prosecutor Paper on some policy issues before the Office of the Prosecutor This policy paper defines a general strategy for the Office of the Prosecutor, highlights the priority tasks to be performed and determines an institutional framework capable of ensuring the proper exercise of its functions. This is a redrafted version of a paper discussed at the public hearing of the Office of the Prosecutor convened from 17 to 18 June...»

«1 Improving the Validity of Contextualised Questions Ayesha Ahmed and Alastair Pollitt University of Cambridge Local Examinations Syndicate Paper to be presented at the BERA Conference, Leeds, September 2001. The opinions expressed in this paper are those of the authors and should not be taken as official policy of the University of Cambridge Local Examinations Syndicate or any of its subsidiaries. Contact details Ayesha Ahmed, RED, UCLES, 1 Hills Road, Cambridge, CB1 2EU ahmed.a@ucles.org.uk...»

«Chapter 2 The Reagan Administration and Public Assistance 2.1 Overview This chapter examines changes in public assistance throughout the 1980s. Section 2.2 discusses the theoretical and empirical underpinnings of the ideological attacks on the welfare state advanced by social scientists and political pundits for whom the Aid to Families with Dependent Children (AFDC) program had come to represent the limits of government beneficence. Legislative changes throughout the 1980s are presented in...»

<<  HOME   |    CONTACTS
2016 www.theses.xlibx.info - Theses, dissertations, documentation

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.