The global SARS-CoV-2/COVID-19 Pandemic has disrupted public health, economies, and housing markets since early 2020. The shock has called forth a number of policy responses, such as moratoria on foreclosures and evictions, attempts to regulate rents and prices, and a range of subsidies on both supply and demand sides. This paper reviews the state of housing markets and discusses the expected efficacy of alternative policy measures taken or contemplated. Recognizing the provisional nature of any paper written during a large and durable ongoing shock, suggestions for additional research are provided.

This paper is based on a presentation to the City University of Hong Kong Workshop on “Postcrisis Housing Market and Financial Stability: Recovery Without Affordability?” held virtually on July 9, 2020, with revisions. That presentation and this paper are in turn based partly on several larger reviews of housing affordability, the coronavirus and its effects on housing and urban development, and potential shocks. Many colleagues have commented on and otherwise contributed to those efforts, including Brent Ambrose, Shlomo Angel, David Barker, Alain Bertaud, Julia Coronado, Morris Davis, Mike Eriksen, Eugene Flynn, Allen Goodman, Jacques Gordon, Richard Green, Marja Hoek, Harvey Jacobs, Kyung-Hwan Kim, Charles Ka Yui Leung, David Ling, Jaime Luque, Duncan Maclennan, Antonio Mello, Stani Milcheva, Norm Miller, Bertrand Renaud, Andy Reschovsky, Jenny Schuetz, Dale Whittington and Jiro Yoshido. Seminar participants at USC and Penn State as well as the participants in the City University of Hong Kong Workshop also provided useful suggestions. Naturally, none of these colleagues are responsible for the results.

Our study investigates the role of speculation in real estate cycles. We find that even a simple model of lagged supply response to price changes and speculation is sufficient to generate real estate cycles. Second, the volatility of prices – the biggest purported downside of "speculation" – is strongly related to supply conditions. Even more interestingly, the effect of speculation itself depends on supply conditions. Markets with more responsive regulatory environments, or less natural constraint (from physical geography), will experience less volatility as well as less behavior characterized as speculation. Demand conditions in general, and speculation in particular, can contribute to a boom and bust cycle in housing and real estate markets – but the effects of speculation appear to be dominated by the effect of the price elasticity of supply. In fact, the largest effects of speculation are only observed when supply is inelastic. Thus effective policies will focus on improving the efficiency of the supply of developable land, and real estate generally, including the development of an appropriate regulatory framework for real estate.

As countries grow and urbanize, the efficient and equitable production and delivery of housing and its associated infrastructure are key elements of successful urbanization. From a social perspective, housing is the most widely held form of wealth in most societies; and through this channel and through the operation of rental markets, housing is an important determinant of the distribution of welfare as well as its average level. Furthermore, housing is a good that is characterized by important external costs and benefits, so it is not surprising that all governments intervene in some fashion in housing through various taxes, subsidies, regulations, and sometimes direct public provision. But the efficacy of these interventions varies widely.

What impact does a forced sale have upon a property owner's wealth? And do certain characteristics of a property owner such as whether they are rich or poor or whether they are black or white, tend to affect the price yielded at a forced sale? This Article addresses arguments made by some courts and legal scholars who have claimed that certain types of forced sales result in wealth maximizing, economic efficiencies. The Article addresses such economic arguments by returning to first principles and reviewing the distinction between sales conducted under fair market value conditions and sales conducted under forced sale conditions. This analysis makes it clear that forced sales of real or personal property are conducted under conditions that are rarely likely to yield market value prices. In addition, the Article addresses the fact that judges and legal scholars have utilized a flawed economic analysis of forced sales in cases that often involve property that is owned by low- to middle-class property owners in part because those who are wealthier own their property under more stable ownership structures or utilize private ordering to avoid the chance that a court might order a forced sale under the default rules of certain common ownership structures. The Article also raises the possibility for the first time that the race or ethnicity of a property owner may affect the sales price for property sold at a forced sale, resulting in a discount, i.e. a discount from market value for the forced sale and a further discount attributable to the race of the property owner. If minorities are more susceptible to forced sales of their property than white property owners or if there does exist a phenomenon in which minorities suffer a double discount upon the sale of their property at a forced sale, then forced sales of minority-owned property could be contributing to persistent and yawning racial wealth gaps.

We empirically examine the effect of neighborhood controls, including homeowner associations and private/limited access streets, on house prices using data from St. Louis, one of the first urban areas in which such development patterns emerged. We find that houses located in limited access subdivisions command an economically significant price premium holding other factors constant. We corroborate the size and economic significance of the price premium identified using data on three quite different suburban communities in Southern California. Findings are consistent with Tiebout sorting.

Rent control generically describes a range of regulations governing rents, as well as related contract features such as security of tenure and required maintenance. There is debate in the literature about the efficacy of controls based on (1) whether the housing market is best modelled as a competitive market, or one where landlords have market power; and (2) whether regulators have sufficient information and appropriate mechanisms to improve imperfect market outcomes. Many empirical studies find that rent controls score badly as redistributive systems. Many basic questions, especially regarding dynamic effects on the supply of housing, have yet to be credibly answered.

Chapter 4 Cross-Country Patterns of Urban Development Stephen Malpezzi, Search for more papers by this author Stephen Malpezzi, Search for more papers by this author Book Editor(s):Richard J. Arnott, Boston College, MassachusettsSearch for more papers by this authorDaniel P. McMillen, University of Illinois at ChicagoSearch for more papers by this author First published: 01 January 2006 https://doi.org/10.1002/9780470996225.ch4Citations: 3 AboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinked InRedditWechat Summary This chapter contains sections titled: Introduction Patterns of Economic Development and Patterns of Urbanization Urbanization and Development Conclusion Citing Literature A Companion to Urban Economics RelatedInformation

This study analyzes the effect New York City’s rent regulation regime has on household mobility. Using a panel dataset from the New York City Housing and Vacancy Survey, we estimate the costs and benefits to a particular household of remaining in a regulated unit each period; then in a second stage, we include the benefits of regulations (lowered rent) and the corresponding costs (from disequilibrium in consumption) as explanatory variables in two mobility models. Both logit and survival models confirm that larger benefits in one period are associated with a lower probability of moving in a second period. Similarly, larger costs (distortions in housing consumption) in one period are associated with a higher probability of moving later. While these effects are modest, they are statistically significant. The benefit and cost effects are, however, not symmetric; the pro-mobility effects of costs are roughly twice as large as the anti-mobility effects of benefits. This provides limited support for the relative loss aversion hypothesis of behavioral economics. This support is limited due to the lack of robustness of the result.

Metropolitan-Specific Estimates of the Price Elasticity of Supply of Housing, and Their Sources by Richard K. Green, Stephen Malpezzi and Stephen K. Mayo. Published in volume 95, issue 2, pages 334-339 of American Economic Review, May 2005