Housing’s Contribution to Economic Development: Reframing the Narrative

 

On September 7-8, 2022, in Bethesda MD: The Way Forward Housing Coalition organized a conference to review the economic and social benefits of well-functioning housing markets, and how to chart a better path forward  in emerging markets and developing countries (EMDCs).  I was pleased to help the organizing committee flesh out the program, and honored to give the wrap-up presentation at the end of the conference.

The organizing committee included Richard Green and Marilyn Ellis of the USC's Lusk Center for Real Estate, Arthur Acolin of the University of Washington, Marja Hoek-Smit of the Wharton School and HOFINET, Monica Rashkin, Patrick McAllister and Patrick Kelley of Habitat for Humanity's  Terwilliger Center, and Malaika Cheney-Coker, formerly with Habitat and now with Ignited Word.

Details of Housing's Contribution to Economic Development – Reframing the Narrative can be found here, including the conference program, information on the speakers, conference partners, and some online resources including useful readings on the subject.

The proceedings were recorded, and you can find them on YouTube: Day 1, and Day 2.

These slides are based on my wrap-up comments for the conference, revised and extended. They are in PowerPoint, and many of the slides have discussion and links in the notes section below the slides.  There are a list of references in the notes to one of the slides near the end of the deck.

My comments and these slides were inspired and informed by my colleagues’ presentations, but they are not a comprehensive summary of all the lessons of the conference.  There is much more to be learned, and discussed, about each of the topics.  As always, feel free to use any of these slides in your own teaching or other non-profit endeavors.  Comments and corrections to these are always welcome.

"Financialization" and Housing: An Economist's Thoughts

 

For a slide presentation on "financialization" from an economist's perspective, with a focus on housing, please click here.

Here's a video with my running commentary.

Comments and corrections are always welcome!

Background on Ukraine: Some History, Some Current Events, Some Thoughts on Reconstruction

 

Shutterstock: Kyiv, July 2021. Photo by Ingus Kruklitis.

In early 2022, I delivered several introductory lectures presenting global perspectives on housing finance. As part of the last of those lectures I included a discussion of Russia's then-threatening behavior towards Ukraine. Our class discussed how the Russia-Ukraine conflict might spill over into the economies of Europe, the U.S., eventually the globe; and a few implications for real estate markets.

Our class met in the morning, and later that day, Russian troops invaded Ukraine.  In the past few months I've expanded the original teaching materials.  They include a little history, some discussion of the economics of Ukraine and Russia, with a focus on oil and gas markets.  Ukrainian housing markets and policies are discussed, as well as some thoughts about reconstruction.  A list of reading and links related to this topic are included at the end.

These materials are pitched at students and assume no familiarity with Ukraine or the region, and are presented in a very informal style.  Professionals and those who know the region well may still find some useful nuggets, especially in the discussion of reconstruction and housing markets.

Since the teaching materials have expanded, here they are presented as a stand-alone PowerPoint file. They are a work in progress. I am not an expert in Ukraine and I appreciate any comments or corrections those who are expert might provide -- especially from Ukrainians.

Update: My colleague Alain Bertaud recently spoke to a group of Ukrainian architects and planners on issues of reconstruction.  The presentation (in English, Ukrainian subtitles available) is a tour de force and is available here.  It is pitched to a higher level audience than my teaching notes, but is extremely accessible to students or anyone interested in the subject. Five star recommendation.

Urbanization and Climate Change: A First Look

 

iStock

On June 21, 2022, I joined 30 participants in a discussion of climate change, with a focus on cities and some of the lessons we can draw from urban and real estate economics, as well as the basics of environmental economics.

The (virtual) venue was organized by Hubert Beroche, of the Ecole Polytechnique.  Hubert is the founder of the school's URBAN AI think tank, which seeks to better apply emerging technologies to urban challenges.  One of URBAN AI's activities is its Emerging Leaders Program, which brings together a group of young scholars and professionals from diverse backgrounds, who participate in a program of lectures and hands-on projects designed to foster new approaches to urban technologies.

I was pleased to participate in one of the sessions, on Urban Economics and Climate Change, which combined lecture and discussion.  You can download the session materials here, a set of roughly 200 PowerPoint slides (what else? 😉)

The video of my presentation can be found here.

Comments and corrections are, as always, very welcome.

Global Perspectives on Housing Finance

 

Revised posting, March 31, 2022

Recently I taught several guest lectures on "Global Perspectives on Housing Finance, at USC (thanks to Richard Green!), at Rutgers (thanks to Morris Davis!) and at Connecticut (thanks to Alex Van de Minne!)

In each of the classes we covered a brief tour d'horizon of global economies and housing markets, and some basic comparisons of housing finance systems hither and yon.  Part of the class was devoted to some global risks faced by real estate investors in the U.S. and elsewhere, including but not limited to COVID.  In the USC class we spent some time on Evergrande and the risks in China's housing markets; at Rutgers and Connecticut, we spend significant time on possible fallout from the Russian invasion of Ukraine (though we started pre-invasion).  Since the Connecticut class was most recent, and there's a lot of overlap across classes, I'm posting that version here.  (The major topic missing is the earlier discussion of China).

Soon after the Rutgers class met, Russia did invade.  I've updated a few of the slides, but I've made no attempt to keep up with the ongoing invasion.  I do provide suggestions for reliable sources on those ongoing events.

These collections are slightly revised versions of the Connecticut presentation. I make these slides available as a public good: feel free to use any of them in your own classes or presentations.  

I recommend the PPT version because it includes notes on many of the slides and more links to original sources.  PDF is included for those who don't have access to PowerPoint and/or a hard drive.

Download revised class slides in PowerPoint (with notes; 83MB)

Download the slides in PDF (no notes; 11MB)

If you are downloading the larger file, I recommend doing a "save as" to your hard disk, then open in PowerPoint. Google Docs doesn't handle these files well.

Comments and corrections are welcome, as always.

Rent Control Redux

 

https://www.bostonherald.com/2020/01/14/rent-control-debate-puts-tenants-landlords-at-odds/ 

"BOSTON, MA – JANUARY 14: Demonstrators attend a rent control rally on the State House steps on January 14, 2020 in Boston, Massachusetts. (Staff Photo By Angela Rowlings/MediaNews Group/Boston Herald)"

https://www.illinoisrealtors.org/blog/the-rent-control-threat-is-real/

We’ve all seen versions of these photos. and many of us have been in these meetings. Rent control is a contentious policy and it’s easy to find passionate voices on both sides of the debate.

There have been some cycles in the popularity of controls of one form or another. Controls are often put in place in wartime. During World War II the United States, most of Europe, in fact many countries around the world instituted emergency controls during the housing shortages that accompany a major mobilization of resources for such a war. 

After the war, over time, these were relaxed in many places and removed in others. The popularity of controls seemed to rebound about 40 years ago, partly because of the rapid inflation that many countries experienced. 

As LSE's Christine Whitehead and Peter Williams among others point out, as inflation subsided controls were relaxed in a number of countries, although certainly not all.  In recent years, given increasing concern with housing affordability, and very recently the COVID pandemic, we’ve seen a resurgence of interest in controls, in some parts of the United States, and around the world. 

In the late 1980s and early 1990s I directed a World Bank research project comparing costs and benefits of rent controls in a range of countries. A terrific team that included Steve Mayo, Peter Rydell, Ricardo Silveira, Vinod Tewari, Graham Tipple, Ken Willis, joined me in preparing a series of case studies, and a wider review of controls in about 50 countries. The best point of entry is a summary monograph that I wrote with the assistance of Gwen Ball; that paper also credits the much larger team that contributed research assistance, data, and country details.  Soon after, Bengt Turner brought his expertise on European controls and housing markets to the table, and in 2003 we collaborated on another survey paper.

The government of Scotland is planning to institute a new system of controls on private rental housing; details as of this writing can be found in their consultation paper, A New Deal for Tenants.  As part of the consultation process, the UK Collaborative Centre for Housing Evidence (CaCHE) organized an online conference to bring together researchers, policymakers, and market participants to discuss the details of rent controls, chaired by Duncan Maclennan.  Links to the sessions can be found here:

• Session 1, A Growing Mosaic
• Session 2, Supply Side Reactions
• Session 3, Proposals and Policy Implications
• Supporting Materials

I was privileged to be a participant in that conference.  The organizers asked me to prepare some brief remarks about research on rent controls, with an emphasis on supply.  You can find my recorded remarks here.

The PowerPoint slides from the presentation, along with references, can be downloaded here.  I do recommend a somewhat expanded version, which you can find here.

Mid-conference, as we discussed policy alternatives, I quickly drafted some additional thoughts, including some "big picture" thinking, e.g. about efficiency and fairness; a few more slides with some simple analytics and research results; and some quickly assembled thoughts about "mechanism design" for rent regulations.  (The Government of Scotland is committed to putting rent control legislation in place, so we're in an nth best world, n to be determined partly by specifics of the regime).  You can find that second deck here.  Comments on any of this material are welcome, but especially on my initial thoughts on mechanism design.

Among other readings, along with the Malpezzi and Ball, Turner and Malpezzi, and Whitehead and Williams papers above, I highly recommend:

• Ed Olsen's classic empirical analysis of controls in New York, "An Econometric Analysis of Rent Control."
• Richard Arnott's "Time for Revisionism on Rent Control?"
• Konstantin Kolodilin's "Rent Control Through the Lens of Empirical Research"

Late breaking news:  Ken Gibb, Adriana Mihaela Soaita and Alex Marsh have just completed their  excellent "Rent Control: A Review of the Evidence Base," which you can download here.

Faithful readers of my blogging (both of you?) might remember that I wrote a rent control post for Morris Davis' Rutgers Center for Real Estate several years ago, when Newark and several other tri-state municipalities were discussing new controls.  Most of the post stands up well as an elaboration of some of the ideas in the materials I've provided above, and you can read that post here. I think the bottom line from that earlier post, lightly edited, is worth repeating here:

The Bottom Line

Early models of rent control, the kind usually found in economics principles texts, suggest that regulating rents will lead to dramatically reduced supply from decreasing construction and accelerated depreciation. Simple evidence we presented here, and the preponderance of more detailed research, suggest these effects have been found.  But the kinds of rent control systems we have in the United States, which mainly limit rent increases (rather than set rent levels well below market, as sometimes found in other countries) are associated with decreases in supply but do not shut off development completely as feared by early analysts like Milton Friedman and George Stigler. Furthermore, rent control is often inefficient in the sense that the benefit delivered to tenants is often much less than the corresponding cost to landlords.

The distribution of benefits from controls, whether first or second generation, is rarely related to any measure we’d use to target housing assistance by income or other measure of need. The sparse evidence we have on landlord income suggest that while landlords are richer on average than tenants, landlord and tenant incomes often overlap. Small scale landlording is often an important point of entry for potential entrepreneurs.

The “bottom-bottom line” can be stated succinctly: Second-generation rent control rarely has the catastrophic effects some early economists suggested, but neither does it deliver effective and targeted relief to households that we would identify as having the strongest housing needs. It does create frictions and perverse incentives that have unintended consequences for housing quality and supply, and labor mobility.  Once installed, politically rent controls become very hard to modify or remove if they do begin to become even more binding on supply.

Other approaches like housing vouchers and changes in building codes land use and development regulations and the like are likely to have a much more positive impact on housing affordability issues.  You can read about some of those in a few related posts, which you can find here.