Real Estate Markets
Paper Session
Friday, Jan. 3, 2025 2:30 PM - 4:30 PM (PST)
- Chair: Rebecca Diamond, Stanford University
Evicted from the Land of Opportunity: Evidence on Displacement from California Rent Control
Abstract
How resilient are earnings and employment to displacement from high-wage, high-productivity (and high cost) cities? We investigate this question using plausibly exogenous eviction from rent-controlled housing in California. Under California’s Ellis Act, landlords are allowed to withdraw their units from the controlled rental market under the condition that they evict all of the building's tenants. We assemble panel data on address histories, employment, income, and neighborhood characteristics for all Ellis-evictees in San Francisco, Los Angeles, and other California cities with rent control and a control group of non-evictees in the same block. We confirm that those large-building evictions appear orthogonal to evictees’ individual characteristics after controlling for observable household and neighborhood effects. Comparing those two groups with a difference-in-difference approach, we find using preliminary results from San Francisco that evicted tenants between 1998 and 2012 not only exhibit a higher propensity to exit the city but also endure a reduction in nominal income that reaches 20 percent eight years after the eviction (relative to the control group), the end of our analysis window. Those income losses are also experienced, in the same magnitude but more gradually, by evictees who remain in San Francisco. Those large income losses contrast with the income improvement we observe for non-eviction-related relocations. The negative impact extends to their residential destinations post-eviction, which tend to be neighborhoods with lower job density, higher unemployment rates, and diminished school quality, particularly for tenants with lower pre-eviction income. Specifically, children from evicted households face significant setbacks, evidenced by diminished earnings in early adulthood, suggesting a persistent intergenerational impact. Initial results from Los Angeles largely confirm our findings from San Francisco, and we expect the full sample to comprise these two cities plus Santa Monica, Berkeley, and Oakland.Making Background Salient to Everyone: The Effects of Open Access Criminal Databases on Offender Behavior
Abstract
Technological advances have led to the creation of large online criminal databases easily accessible to the public. However, the impact of this accessibility on the offenders in these databases remains unclear. We investigate this by studying the launch of Sweden’s first online criminal database, which facilitates anonymous and free name-based searches for individuals charged with a crime. The platform completely transformed the process of criminal background checks in Sweden, drawing an estimated 20 million checks annually. Generally speaking, estimating the effect of access to criminal background information on offender behavior is challenging. Aside from accounting for correlated unobservables, a critical methodological problem that has plagued an entire literature in criminology and economics, is how to distinguish between the role of informal sanctions attached to the stigma of being labeled a criminal and that of formal ones (e.g. community service, probation or prison) tied to the punishment offenders receive in court. While these mechanisms may operate in different direction, previous studies have typically not been able to separately identify criminal labeling net of formal sanctions. Leveraging administrative rules that restricted the identification of individuals charged before specific dates, we estimate the effects by comparing outcomes of exposed and non-exposed individuals. We find significant adverse effects of exposure on criminal recidivism and labor market outcomes. Most of the effects are concentrated among defendants who were acquitted in court. This novel finding helps to clarify the role of informal sanctions independent of formal ones. The adverse effects are also stronger in areas with fewer criminals and among first-time offenders. These results highlight that the stigma associated with criminal labeling is a potentially important but previously unappreciated mechanism explaining behavioral responses to criminal justice interactions. Our findings speak to the ongoing debate on what type of information should be disclosed in background checks.Mind the Appraisal Gap: Understanding the Extent and Consequences of Low Appraisals Among Minority Borrowers and in Minority Neighborhoods
Abstract
Using comprehensive data from single-family home purchase appraisals matched to HMDA, we study the incidence of low appraisals (i.e., where the appraised value is less than the contract price) and the magnitude of the corresponding appraisal gap (i.e., the difference between the appraised value and the contract price). Low appraisals are significantly more common for properties in majority-minority neighborhoods and particularly for minority borrowers within those neighborhoods. In contrast, Black and Hispanic borrowers purchasing properties outside majority-minority neighborhoods are less likely to receive a low appraisal than non-Hispanic Whites purchasing similar properties in those neighborhoods. Appraiser location and race significantly impact the likelihood of a low appraisal. Low appraisals (and larger appraisal gaps) significantly increase the likelihood of credit denial overall, particularly for collateral reasons, but the effect differs by race; Asians are less likely than Whites to be denied following a low appraisal, whereas Blacks and Hispanics are more likely to be denied. We also find some evidence that appraisals for properties in majority-minority neighborhoods use lower quality comparable properties when the borrower is a minority, particularly for Asians and Blacks.Rent Guarantee Insurance
Abstract
This paper studies the welfare effects from the introduction of rent guarantee insurance (RGI). RGI makesa limited number of rent payments to the landlord on behalf of the insured tenant who may be unable
to pay rent due to a negative income or health expenditure shock. We introduce RGI in a rich quantitative
equilibrium model of housing insecurity and show it increases welfare by improving risk sharing
across idiosyncratic and aggregate states of the world, reducing the need for a large security deposits, and
reducing homelessness which imposes large costs on society.
The Case of Missing Mortgages: Are Minorities Still Being Disproportionately Denied a Loan and for What Reasons?
Abstract
Does discrimination in mortgage lending persist even in the age of automated underwriting? Using recently expanded Home Mortgage Disclosure Act (HMDA) data, this paper looks at loan denial rates and finds that even accounting for risk factors such as credit scores and high debt-to-income (DTI) ratio, demographic indicators still play a considerable role. African Americans and Native Americans are the minority groups that have the greatest probability of their loan application being turned down followed by Hispanics. The analysis shows that if minorities were denied mortgages at rates similar to Caucasians, there would be about 330,000 more mortgages originated in the period 2018-22. Minorities are most often denied for limited credit history, high DTI or insufficient collateral. If approved for a mortgage, they are more likely to be offered a high-cost loan characterized by an interest rate with a spread thus making homeownership costlier for them.JEL Classifications
- R0 - General