Housing Policy and Homeownership
Paper Session
Friday, Jan. 7, 2022 3:45 PM - 5:45 PM (EST)
- Chair: Judith Ricks, U.S. Consumer Financial Protection Bureau
Is There Crowd-Out in Mortgage Refinance?
Abstract
We examine whether supply-side capacity constraints contribute to the well documented “failure to refinance” among marginal borrowers who would benefit financially from doing so. Our analysis uses loan-level data to show that among lower-credit score borrowers, mortgage prepayment rates are substantially lower in markets that are operating closer to their capacity constraint (e.g., during refinance booms) than in less constrained markets. In contrast, high credit score borrowers in markets operating near capacity prepay at higher rates compared to those in unconstrained markets. We explore the mechanisms behind these effects. Overall our findings suggest that in addition to demand-side explanations for differences in refinancing highlighted in previous literature, supply-side factors also play an important role.Does Space Matter? The Case of a Cap on the Housing Expenditure Share
Abstract
This paper argues that the introduction of space dramatically changes our evaluation of housing market-related policies. First, we document three stylized facts: the declining housing-related expenditure share with expenditure, the income invariant working hours, and the spatial distribution of income-heterogeneous households. We then show that a space-less model can match the first two facts only with heterogeneity in preference and income. In comparison, a canonical monocentric city model fits all three facts with heterogeneity in income only. Moreover, a policy cap's behavioral and welfare implications on the shelter cost-to-income ratio in the two models are very different.Who Gains from Housing Market Stimulus? Evidence from Housing Assistance Grants with Threshold Prices
Abstract
Governments use home ownership schemes for the dual purpose of improving housing affordability and stimulating house construction. This paper studies how the housing market responds to housing assistance policies by exploiting a natural experiment in Sydney, Australia, where buyers of new homes priced up to $600,000 were eligible for government subsidies between July 2010 and June 2012. We find this policy causes large distortions to sales volume and price level. We observe a large bunching just below the threshold price of $600,000, over 8 times the counterfactual density. The source of the bunching mass comes from both buyers moving down the price range as well as new entrants attracted to the market by the policy. We also examine price impact and find that policy affected new homes just below the threshold are associated with an overpricing of about $3,000, offsetting up to 56% of the received benefit. Further, homes are about 25% smaller in size than comparable homes in prior periods. Lastly, we document a wealth effect where neighborhoods receiving more subsidies experience an increase in new car purchases. Overall, this study sheds light on the effectiveness and externalities of housing subsidies to improve homeownership.Discussant(s)
Lauren Lambie-Hanson
,
Federal Reserve Bank of Philadelphia
Chandler Lutz
,
U.S. Securities and Exchange Commission
Jacelly Cespedes
,
University of Minnesota
Jessica Shui
,
U.S. Federal Housing Finance Agency
JEL Classifications
- R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location