Segmented Housing Supply
Published:
with Nathaniel Baum-Snow and Sidharth Moktan
Abstract:
Housing supply may not respond equally across the quality distribution. Existing work generally assumes a single supply elasticity within a market, which prevents the relative price of high- and low-quality housing from adjusting to local demand conditions. This project relaxes that assumption. We develop a general equilibrium model of a city in which households of differing incomes sort across indivisible housing units of varying quality, and in which the elasticity of housing supply may differ across quality segments. We then estimate these segment-specific elasticities using variation in house price growth across cities, and use the model to study the implications for housing affordability and its incidence across the income distribution.