Essays on the Economics of Affordable Housing

There is growing evidence suggesting that neighborhoods play a crucial role in the accumulation of human capital and have tremendous effects on the opportunities available to people who live in them. The fact that selecting a neighborhood where to live has become one of the main economic choices that a household makes has raised concerns that some household may be systematically excluded from the most beneficial areas, which may contribute to the persistence of inequality. This dissertation studies two important factors that have been limiting the ability of households in the United States to choose where to live: discrimination and exorbitant housing prices. Chapter 2 and chapter 3 study two possible solutions that have been proposed to help increase the availability of affordable housing for rental and for purchase respectively: nonprofit housing development and community land trusts. Chapter 4 studies a channel that has been systematically excluding minority buyers from desirable neighborhoods: discrimination by real estate agents.

Chapter 2 examines the neighborhood spillover effects of rental housing development by nonprofit and for-profit developers in Philadelphia. Nonprofits, which receive public subsidies and prioritize affordability goals over profit maximization, are believed to produce significant benefits to surrounding neighborhoods. The study finds that nonprofit development has localized effects, with slightly higher home values and lower moving probabilities for households within 200m of the development, but no detectable effect on income. At a greater distance (between 600 and 800m), there are slightly less positive effects on house values and slightly more positive effects on moving probability compared to for-profit development.

Chapter 3 examines the effect of Community Land Trusts (CLTs) on neighborhood composition and affordability. CLTs are nonprofit organizations that buy and resell houses at subsidized prices while retaining ownership of the land and leasing it to homeowners with long-term agreements to maintain affordability. The study finds evidence that neighborhood housing values decrease in the vicinity of CLT properties and so does the probability of displacement decreases for Black and Hispanic households, suggesting that CLTs help residents at higher risk of displacement to remain in their neighborhood.

Chapter 4 investigates the impact of real estate agents on housing market outcomes, with a particular focus on discriminatory behavior. Real estate agents play a critical role in the housing market, and any discriminatory behavior on their part could perpetuate historic segregation patterns. The chapter aims at distinguishing steering (discrimination) from preference-based sorting by developing a statistical discrimination test.