Modern economics of housing : a guide to theory and policy for finance and real estate professionals
Pozdena, Randall Johnston
Modern economics of housing : a guide to theory and policy for finance and real estate professionals - New York Quorum Books 1988 - xxii, 203, ip.
CONTENTS figures xiii Tables xv Preface xvii Introductionxix 1, A Historical Perspective on Housing in America 1 EPOCHS IN AMRRICAN HOUSING 1 The Colonial and Early Federal Period: 1600-1800 2 The Expanding Frontier: 1790-1890 3 The Urbanization of America: 1890-1929 7 The Depression and the War Years: 1929-1945 10 The Maturing of Housing and Financial Institutions:1950-1970 13 Housing Conditions and Trends since 1970 15 INTERPRETING THE HISTORY OF HOUSING 1 8 2. The Determinants of Housing Demand 19 THE CONCEPT OF DEMAND 19 HOUSING VERSUS HOUSING SERVICES 21 THE HOUSING DEMAND FUNCTION 21 The Influence of Price 22 Housing Demand and Income 23 Population and Household Formation 28 SUMMARY 34 3. The Fundamentals of Housing Supply 35 THE HOUSING SUPPLY PROCESS 36 Housing Supply: Definitions and Measures 36 Housing Investment and Stock Supply 39 THE EQUILIBRIUM PRICE OF HOUSING UNITS 40 THE FLOW SUPPLY OF HOUSING SERVICES 42 Heterogeneity in Service Flows 43 EVIDENCE ON THE ELASTICITY OF HOUSING SUPPLY 44 SUMMARY 46 4. The Market for Land and Improvements 47 THE MARKET FOR LAND AND SITES 48 The Price of Land 48 Substitution of Improvements for Land 50 Land Use Regulation and Land Rents 52 THE SUPPLY OF IMPROVEMENTS: THE ECONOMICS OF CONSTRUCTION 53 The Housing Production Function 54 The Behavior of the Construction Industry 57 SUMMARY AND IMPLICATIONS 59 , Suburbs and Cities: The Pattern of Housing Location 63 THE REGIONAL ECONOMY 64 The Regional Center and Land Rents 65 THE LOCATION OF HOUSEHOLDS IN A REGION 68 The Household Decision Process 69 The Pattern of Residential Land Rents 70 Land Rents and Transportation Costs 72 Household Income and Land Rents 73 The Mystery of the Decline of American Cities 75 SUMMARY AND CONCLUSIONS 76 6. Determination of Housing Prices and Rents 79 FORMALIZING THE MODEL 82 THE HOUSING MARKET AND USER COSTS 82 A Basic Measure of User Costs 84 Equilibrium User Costs and Housing Prices 85 The Influence of Housing Supply Conditions 85 INCOME TAXES, INFLATION AND USER COSTS 87 The User Cost: A More Complex Variant 88 Income Taxation, Inflation, Housing Prices and Rental Prices 89 Speculative Bubbles in Housing 92 SUMMARY AND IMPLICATIONS 94 The 1970s in Perspective 95 7. The Market for Rental Housing 97 THE TENURE DECISION! THE CONVENTIONAL VIEW 99 THE TENURE DECISION: A MODERN VIEW 100 Links between Ownership and Tenancy 100 Taxation of Landlords versus Owner Occupants 101 Tax Treatment of Maintenance and Depreciation 103 The Effects of Different Tax Rates 103 RENTAL MARKET EQUILIBRIUM 104 The Rental Market and Inflation Expectations 105 THE 1970S AND 1980s IN REVIEW 106 THE TENURE DECISION: MODERN INFLUENCES 108 Tax Treatment of Property Taxes and Mortgage Interest 108 Limitations on Real Estate Tax Shelters 109 Flat Tax Rates and Housing 110 Government Involvement in the Rental Market: Rent Control111 SUMMARY AND CONCLUSIONS 1 13 The Mortgage Market and Housing 115 RECENT TRENDS IN MORTGAGE USE 116 THE BASIC ECONOMICS OF DEBT MARKETS 116 Household Demand for Debt 117 A Life Cycle Perspective on Mortgage Debt 118 The Supply of Debt in the Economy 119 THE ROLE OF FINANCIAL INTERMEDIARIES 120 The Theory of Financial Intermediation 120 Mortgage Institutions: The Imprint of Government Policy 121 MORTGAGE INSTRUMENTS: THE BASIC FEATURES 126 Collateral and Mortgage Contracts: The Loan-to- Value Ratio 126 Mortgage Payment Features 127 MORTGAGE INNOVATION IN THE 1970s AND 1980s 128 Changes in Conventional Loans 129 Rollover Mortgages and Balloon Loans 130 Graduated Payment Mortgages 130 Adjustable Rate Mortgages 131 DOES MORTGAGE POLICY MATTER? 132 The Evidence Against Promoting the Mortgage Market 132 The Evidence Favoring Mortgage Market Intervention 134 SUMMARY AND FINAL OBSERVATIONS 135 9. The Market for Housing Quality 137 THE PROBLEM OF HOUSING QUALITY 138 Incidence of Substandard Housing 138 Slums and Neighborhood Deterioration 139 Racial Disparities in Housing Quality 140 THE CAUSES OF SUBSTANDARD HOUSING AND SLUMS 142 The Influence of Income 142 Supplying Low-Cost Housing 143 Neighborhood Effects 145 FEDERAL HOUSING PROGRAMS 146 Supply-Side Programs 146 Demand-Side Programs 150 SUMMARY AND CONCLUSIONS 151 10. Cycles in Housing Activity 153 THE MODERN THEORY OF ECONOMIC CYCLES 154 The Costs of Cycles 155 The Causes of Business Cycles 155 THE LONG CYCLES IN HOUSING ACTIVITY 159 A Monetarist View of the Housing Cycle 159 Real Business Cycle Theory and the Housing Cycle 163 SEASONAL CYCLES IN THE HOUSING MARKET 165 The Influence of Supply Factors on Seasonal Cycles 166 The Influence of Demand Factors on Seasonality 167 The Costs of Seasonality 168 HOUSING VACANCIES AND THE BUSINESS CYCLE 169 The Theory of Vacancy Rates 170 SUMMARY AND CONCLUSIONS 173 M. The Future of American Housing 175 THE FUTURE DEMAND FOR HOUSING 176 Future Economic Conditions 176 Future Population Characteristics 178 The Influence of Foreign Demand 179 THE FUTURE OF HOUSING SUPPLY 180 The Technology and Regulation of Home Construction 180 The Future of Housing Finance 181 IMPLICATIONS AND CONCLUSIONS 183 Getting from Here to There 184 Will Housing Be Unaffordable? 184 Notes 187 Selected Bibliography 197 Index 199
0899302319
363.50973 / POZ
Modern economics of housing : a guide to theory and policy for finance and real estate professionals - New York Quorum Books 1988 - xxii, 203, ip.
CONTENTS figures xiii Tables xv Preface xvii Introductionxix 1, A Historical Perspective on Housing in America 1 EPOCHS IN AMRRICAN HOUSING 1 The Colonial and Early Federal Period: 1600-1800 2 The Expanding Frontier: 1790-1890 3 The Urbanization of America: 1890-1929 7 The Depression and the War Years: 1929-1945 10 The Maturing of Housing and Financial Institutions:1950-1970 13 Housing Conditions and Trends since 1970 15 INTERPRETING THE HISTORY OF HOUSING 1 8 2. The Determinants of Housing Demand 19 THE CONCEPT OF DEMAND 19 HOUSING VERSUS HOUSING SERVICES 21 THE HOUSING DEMAND FUNCTION 21 The Influence of Price 22 Housing Demand and Income 23 Population and Household Formation 28 SUMMARY 34 3. The Fundamentals of Housing Supply 35 THE HOUSING SUPPLY PROCESS 36 Housing Supply: Definitions and Measures 36 Housing Investment and Stock Supply 39 THE EQUILIBRIUM PRICE OF HOUSING UNITS 40 THE FLOW SUPPLY OF HOUSING SERVICES 42 Heterogeneity in Service Flows 43 EVIDENCE ON THE ELASTICITY OF HOUSING SUPPLY 44 SUMMARY 46 4. The Market for Land and Improvements 47 THE MARKET FOR LAND AND SITES 48 The Price of Land 48 Substitution of Improvements for Land 50 Land Use Regulation and Land Rents 52 THE SUPPLY OF IMPROVEMENTS: THE ECONOMICS OF CONSTRUCTION 53 The Housing Production Function 54 The Behavior of the Construction Industry 57 SUMMARY AND IMPLICATIONS 59 , Suburbs and Cities: The Pattern of Housing Location 63 THE REGIONAL ECONOMY 64 The Regional Center and Land Rents 65 THE LOCATION OF HOUSEHOLDS IN A REGION 68 The Household Decision Process 69 The Pattern of Residential Land Rents 70 Land Rents and Transportation Costs 72 Household Income and Land Rents 73 The Mystery of the Decline of American Cities 75 SUMMARY AND CONCLUSIONS 76 6. Determination of Housing Prices and Rents 79 FORMALIZING THE MODEL 82 THE HOUSING MARKET AND USER COSTS 82 A Basic Measure of User Costs 84 Equilibrium User Costs and Housing Prices 85 The Influence of Housing Supply Conditions 85 INCOME TAXES, INFLATION AND USER COSTS 87 The User Cost: A More Complex Variant 88 Income Taxation, Inflation, Housing Prices and Rental Prices 89 Speculative Bubbles in Housing 92 SUMMARY AND IMPLICATIONS 94 The 1970s in Perspective 95 7. The Market for Rental Housing 97 THE TENURE DECISION! THE CONVENTIONAL VIEW 99 THE TENURE DECISION: A MODERN VIEW 100 Links between Ownership and Tenancy 100 Taxation of Landlords versus Owner Occupants 101 Tax Treatment of Maintenance and Depreciation 103 The Effects of Different Tax Rates 103 RENTAL MARKET EQUILIBRIUM 104 The Rental Market and Inflation Expectations 105 THE 1970S AND 1980s IN REVIEW 106 THE TENURE DECISION: MODERN INFLUENCES 108 Tax Treatment of Property Taxes and Mortgage Interest 108 Limitations on Real Estate Tax Shelters 109 Flat Tax Rates and Housing 110 Government Involvement in the Rental Market: Rent Control111 SUMMARY AND CONCLUSIONS 1 13 The Mortgage Market and Housing 115 RECENT TRENDS IN MORTGAGE USE 116 THE BASIC ECONOMICS OF DEBT MARKETS 116 Household Demand for Debt 117 A Life Cycle Perspective on Mortgage Debt 118 The Supply of Debt in the Economy 119 THE ROLE OF FINANCIAL INTERMEDIARIES 120 The Theory of Financial Intermediation 120 Mortgage Institutions: The Imprint of Government Policy 121 MORTGAGE INSTRUMENTS: THE BASIC FEATURES 126 Collateral and Mortgage Contracts: The Loan-to- Value Ratio 126 Mortgage Payment Features 127 MORTGAGE INNOVATION IN THE 1970s AND 1980s 128 Changes in Conventional Loans 129 Rollover Mortgages and Balloon Loans 130 Graduated Payment Mortgages 130 Adjustable Rate Mortgages 131 DOES MORTGAGE POLICY MATTER? 132 The Evidence Against Promoting the Mortgage Market 132 The Evidence Favoring Mortgage Market Intervention 134 SUMMARY AND FINAL OBSERVATIONS 135 9. The Market for Housing Quality 137 THE PROBLEM OF HOUSING QUALITY 138 Incidence of Substandard Housing 138 Slums and Neighborhood Deterioration 139 Racial Disparities in Housing Quality 140 THE CAUSES OF SUBSTANDARD HOUSING AND SLUMS 142 The Influence of Income 142 Supplying Low-Cost Housing 143 Neighborhood Effects 145 FEDERAL HOUSING PROGRAMS 146 Supply-Side Programs 146 Demand-Side Programs 150 SUMMARY AND CONCLUSIONS 151 10. Cycles in Housing Activity 153 THE MODERN THEORY OF ECONOMIC CYCLES 154 The Costs of Cycles 155 The Causes of Business Cycles 155 THE LONG CYCLES IN HOUSING ACTIVITY 159 A Monetarist View of the Housing Cycle 159 Real Business Cycle Theory and the Housing Cycle 163 SEASONAL CYCLES IN THE HOUSING MARKET 165 The Influence of Supply Factors on Seasonal Cycles 166 The Influence of Demand Factors on Seasonality 167 The Costs of Seasonality 168 HOUSING VACANCIES AND THE BUSINESS CYCLE 169 The Theory of Vacancy Rates 170 SUMMARY AND CONCLUSIONS 173 M. The Future of American Housing 175 THE FUTURE DEMAND FOR HOUSING 176 Future Economic Conditions 176 Future Population Characteristics 178 The Influence of Foreign Demand 179 THE FUTURE OF HOUSING SUPPLY 180 The Technology and Regulation of Home Construction 180 The Future of Housing Finance 181 IMPLICATIONS AND CONCLUSIONS 183 Getting from Here to There 184 Will Housing Be Unaffordable? 184 Notes 187 Selected Bibliography 197 Index 199
0899302319
363.50973 / POZ