Housing is a critical target of public policy in France. The budget of housing policies devoted to transfers exceeded 40 billion euros in 2014 or approximately 2% of GDP. These policies include housing benefits, property taxes and construction subsidies and extend to social housing and rent controls. Redistribution and market failures, due to externalities for instance, provide the economic underpinning of those public policies
Research in economics in France suffers from a significant under-investment in housing economics, relative to labor economics for instance. The impact of housing policies is typically studied in the short-run and using quasi-experiments. The medium or long run impacts in terms of efficiency or redistribution are under-investigated. An example is provided by housing benefits in which we have good studies on the short-run effects but no general equilibrium studies that would tell us how prices reflect the existence of these transfers.
Our proposal aims at filling this gap: its overarching scientific purpose is to deepen our understanding on the long run impact of housing policies on housing inequalities in France and across countries.
The first center-stage research task in this project is to build up dynamic structural models of household inter-temporal decisions regarding their housing with an emphasis on life-cycle issues, and to calibrate these models using French data. There exists no such empirical model for France and only recently for the US. This core model will be used to assess the long-run impacts of housing public policies like housing benefits, means-tested zero-interest loans to first time owners etc. In particular, it would measure the order of magnitude of the reduction of housing inequalities that can be achieved by public policies, including general equilibrium effects through prices and rents.
The second objective, necessary to complete the first part, is to thoroughly document housing inequalities and the effects of public policies across countries and time over recent years. The objective is indeed to benchmark the effects of housing policies that the general equilibrium models deliver. This is addressed in the second task of the project. There are therefore close interactions, both ways, between these empirical analyses and the baseline model.
Third, the baseline model will be extended in complementary directions. One key dimension is to model the supply side and specifically, residential investment. We aim at analyzing the effect of public subsidies, such as fiscal incentives, on the number of new housing units and their sizes and quality, including environmental quality. Another dimension is to develop more robust models and more precise estimations of household preferences and other parameters, using microeconomic panel data and current state-of-the-art econometric methods to buttress the micro-foundations of the baseline model.
Last, the project takes stock of the previous dimensions to address two key elements of French housing policies: social housing and rent controls. A first subproject focuses on the political economy of social housing or construction programs modeled as a voting game between municipalities in which owners and renters have radically different preferences. A second one deals with the economic geography question of the gradient of housing prices and rents within cities using datasets on housing prices and rents to be collected from the internet by the team. Using these data will improve our understanding of urban unemployment and how commuting negatively affect employment in cities.
FONDATION JEAN JACQUES LAFFONT (Fondation de recherche)
The author of this summary is the project coordinator, who is responsible for the content of this summary. The ANR declines any responsibility as for its contents.
Groupement de Recherche en Economie Quantitative d’Aix-Marseille (GREQAM)
FOND NAT DES SCIENCES POLITIQUES
FONDATION JEAN JACQUES LAFFONT
Help of the ANR 657,170 euros
Beginning and duration of the scientific project: - 48 Months