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Housing Tenure, Evictions, and Property Rights Restrictions

Paper Session

Sunday, Jan. 7, 2018 10:15 AM - 12:15 PM

Loews Philadelphia, Washington B
Hosted By: American Real Estate and Urban Economics Association
  • Chair: Edgar Olsen, University of Virginia

Owned Now Rented Later? Housing Stock Transitions and Market Dynamics

Stuart Rosenthal
,
Syracuse University

Abstract

An overlooked feature of housing market dynamics is the tendency for housing stock to transition between the owner-occupied and rental sectors of the market. Using eleven years of census data from 2000-2014, along with the 1985-2013 American Housing Survey panel, this paper documents the frequency of such transitions and analyzes their determinants. Vintage model estimates indicate that with each passing decade, there is a net transition of roughly 2 percent of the housing stock into the rental sector. Short run transitions can be much more volatile, with rising prices drawing rental units into the owner-occupied sector and falling prices having the opposite effect. Between 2000 and 2014, roughly 6.5 percent of homes built prior to 2000 and 10.3 percent of homes built in the 1990s shifted from owner-occupied to rental status. Own-to-rent transitions are more common when the current occupant is under water, but only when a viable market exists in the rental sector. A simple conceptual model based on the investment and consumption demands for housing suggests that the mechanisms that drive tenure transitions should be similar pre- and post-financial crisis, consistent with model estimates. From a policy perspective, the paper’s findings confirm that tenure transitions amplify the rate at which homes filter down. Moreover, recent dramatic shifts of housing stock into the rental sector are likely to be reversed as house prices rebound, and may account in part for the sluggish recovery of new home construction since the financial crisis.

Diverted Homeowners and Rental Affordability

Gary Painter
,
University of Southern California
Hyojung Lee
,
University of Southern California
Dowell Myers
,
University of Southern California

Abstract

Although much has written about the housing market collapse in 2006 and the decline in rental affordability, studies linking the two have been relatively scarce. This paper posits a direct link between shifts in homeowner/rental demand. In so doing, this paper notes that 8.4 million would-be homeowners (the expected number given market and demographic characteristics in 2000) have been shifted to renting or have left the housing market in 2015. These diverted homeowners triggered a cascade of adjustments throughout the rental housing market, suggesting that a one-percentage point lower homeownership rate than was expected increases median gross rent by about 14 dollars, the share of rental households paying 30% or more of household income on rent by 0.83 percentage points, and the share of households paying 50% or more by 0.57 percentage points.

The Effects of Residential Evictions on Low-Income Adults

Robert Collinson
,
New York University
Davin Reed
,
New York University

Abstract

Large rent increases since the Great Recession have increased attention to the consequences of housing instability, with particular focus on residential evictions. We assemble novel data linking housing court cases in New York City with administrative data from a number of sources. We leverage the random assignment of cases to courtrooms to estimate the causal effect of evictions on residential mobility, homelessness, employment, earnings, receipt of benefits, and health. We find that evictions in housing court substantially increase the probability of applying to a homeless shelter and time spent in shelter. Evictions also increase residential instability, causing households to move more often beyond their initial move out. Evictions reduce employment and quarterly earnings only slightly and have small or nonexistent effects on benefits receipt. Our results suggest that if residential instability and homelessness are costly to individuals and society, policies that provide liquidity to low-income renters, insure them against negative shocks, or help smooth housing transitions could be welfare-enhancing.

Property Right Restriction and House Prices

Kwan Ok Lee
,
National University of Singapore
Joseph Ooi
,
National University of Singapore

Abstract

Using a natural experiment in Singapore, we examine the economic impact of temporarily restricting an owner’s right to transfer his property. Executive condominiums (ECs) introduced to address housing affordability for middle class are subject to restrictions on their transferability within the first ten years unlike private condominiums. Among transacted units carefully matched by their location, completion and transaction dates, and complex- and unit-level characteristics, we find that selling prices of new EC units are about 17.23% lower than their counterpart private condominium units. After the fifth year when EC owners can sell their units to domestic residents but not to foreigners, the price gap between ECs and private condominiums narrows to about 10.88%. Finally, the prices of ECs and private condominiums converge after the tenth year when all the restrictions on private property rights are removed. These results suggest that placing property right restriction and complete illiquidity for a temporary period has a significant, negative impact on property prices for this period. An implication for affordable housing policies is that middle-class beneficiaries enjoy both initial price discount and potential price appreciation.
Discussant(s)
John C. Weicher
,
Hudson Institute
Kevin Corinth
,
President’s Council of Economic Advisers
JEL Classifications
  • R2 - Household Analysis
  • J0 - General