RESEARCH

Working Papers

The Effects of Gentrification on Household Finance and Mobility (with Aditya Aladangady)

Over the past two decades, young, college-educated workers have flocked to city centers, transforming formerly lower-income neighborhoods in the process.  Whether longtime residents have shared in their neighborhoods’ economic gains, however, remains to be seen.  This paper uses twenty years of individual-level credit bureau records to estimate the impact of gentrification on incumbents. Specifically, we compare mobility, housing, and credit outcomes for existing residents from census tracts that later gentrified to observably similar individuals in nearby tracts that did not. Our results paint a nuanced picture of gentrification’s effects on existing residents: out-migration rises, but effects on credit and housing outcomes are modestly positive on average.  Gentrification raises the likelihood of moving away from the original tract, particularly among households with stronger neighborhood attachment, such as homeowners or those with longer neighborhood tenure. Surprisingly, the mobility and financial effects of gentrification depend most profoundly not an incumbent’s homeownership status, but on their initial neighborhood’s housing supply elasticity. Out-migration effects are driven almost entirely by inelastic supply tracts. In these neighborhoods, incumbent homeowners are more likely to extract home equity, while renters are more likely to fall behind on loan payments. In contrast, renters in elastically supplied neighborhoods are less likely to move or experience delinquency. This suggests increasing new construction through more permissive land use policies could mitigate gentrification-related displacement and improve credit outcomes for incumbent renters.

Upzoning with Strings Attached: Evidence from Seattle’s Affordable Housing Mandate (with Betty Wang)

This paper analyzes the effects of a major municipal residential land use reform on new home construction and developer behavior. We examine Seattle’s Mandatory Housing Affordability (MHA) program, which relaxed zoning regulations while also encouraging affordable housing construction in 33 neighborhoods in 2019. The reforms allowed for more dense new development (‘upzoning’), but also required developers to either reserve some units of each project at below market rates or pay into a citywide affordable housing fund. Using a difference-in-differences estimation comparing areas affected versus unaffected by the reforms, we show new construction did not grow as much in the upzoned, affordability-mandated census blocks. Our quasi-experimental border design finds strong evidence of developers strategically siting projects away from MHA-zoned plots – despite their upzoning – and instead to nearby blocks and parcels not subject to the program’s affordability requirements. The differential reduction from MHA to non-MHA zones could be as large as 70% of average permitting activity at the border. The effects are driven by multifamily and mixed-use development. Our findings speak to policy discussion on balancing more density with mandating affordability contribution for the same project.

Reclaiming Local Control: School Finance Reforms and Housing Supply Restrictions

Local policies preventing new home construction have severe negative spillover effects on housing affordability, geographic mobility, and macroeconomic growth. This paper examines the loss of local control over public good financing as a new causal channel behind the rise of such housing supply restrictions. Local governments rely on both fiscal and land use policy to provide quality public goods. I develop a model showing losing autonomy over property taxation creates incentives to limit new development, as localities can neither self-finance nor price public goods. I then exploit California's mid-1970s landmark school finance equalization, which prevented jurisdictions from setting their desired level of education spending, as a natural experiment for this loss of control. Using linked historical data on school district finances, housing, and municipal land use policies, I show in a difference-in-differences framework that school districts with larger exclusionary motives--those that benefited most from local control of education funding--enacted more stringent land use controls and built less housing after the reforms. I find suggestive evidence of the exclusionary effects of supply restrictions. House prices increased and minority population share decreased in wealthy school districts constrained by the equalization. These findings have implications for the unintended effects of fiscal federalism on the housing market, namely that fiscal policy affects new development in the short run and the urban form in the long run.

Persistence of Prejudice: Estimating the Long-Term Effects of Redlining (Revise & Resubmit)

As part of a New Deal initiative to minimize home foreclosure, federal government officials and local real estate professionals graded each neighborhood in America’s largest cities on its perceived credit risk. Using recently digitized maps that precisely show neighborhoods marked with red ink (highest risk) or yellow ink (slightly lower risk), I document that surveyors disproportionately assigned the most restrictive credit rating to neighborhoods with black residents. Nearly 90 percent of African Americans in 1940 lived in a census tract marked for credit redlining. Comparing credit-restricted "redlined" census tracts to adjacent "yellow-lined" tracts, I estimate the long-run effects of redlining on housing and neighborhood outcomes. Between 1940 and 1970, redlining was associated with large differential declines in housing supply and population density; homeownership rates and racial composition did not change differentially from their 1940 baseline though. Once discriminatory lending was outlawed during the mid-1970s, there was moderate convergence in homeownership rates and racial composition. However, housing supply and population density remain persistently lower in formerly credit-restricted census tracts relative to their credit-favored neighbors. Although African-American neighborhoods were much more likely to be redlined, I show the effects do not vary by a neighborhood’s initial share of African American residents. Results also hold when restricting the sample to neighborhoods without any black residents in 1940. Taken together, these findings suggest redlining impacted neighborhood housing supply and population independent of pre-war patterns of racial segregation.Job Market Paper

In Progress

Locked In: Rate Hikes, Housing Markets, and Mobility (with Aditya Aladangady and Tess Scharlemann)

Income Forecastability, Liquid Wealth, and Consumption (with Aditya Aladangady and Jesse Bricker)

Peer Reviewed Publications

“The Impact of Local Residential Land Use Restrictions on Land Values Across and Within Single Family Housing Markets” (with Joseph Gyourko) Journal of Urban Economics, 2021, also released as NBER Working Paper no. 28993 July 2021.

“The Local Residential Land Use Regulatory Environment Across U.S. Housing Markets: Evidence from a New Wharton Index” (with Joseph Gyourko and Jonathan Hartley) Journal of Urban Economics, vol. 124. July 2021.
Media Coverage: The Wall Street Journal 1, The Wall Street Journal 2, MarketWatch, City Journal, Marginal Revolution

“Signaling Status: The Impact of Relative Income on Household Consumption and Financial Decisions” (with Jesse Bricker and Rodney Ramcharan) Management Science, 2020, pp. 1-17

Other Publications

“The Future of the Community Reinvestment Act” (with Susan Wachter) University of Pennsylvania Institute for Urban Research Brief. 2019

“Measuring Income and Wealth at the Top Using Administrative and Survey Data" (with Jesse Bricker, Alice Henriques, and John Sabelhaus) Brookings Papers on Economic Activity, Spring 2016, pp. 261-321.

“Estimating Top Income and Wealth Shares: Sensitivity to Data and Methods” (with Jesse Bricker, Alice Henriques, and John Sabelhaus) American Economic Review: Papers and Proceedings, vol. 106, no. 5, pp. 641-645. 2016.

“Comparing Micro and Macro Sources for Household Accounts in the United States: Evidence from the Survey of Consumer Finances” (with Lisa J. Dettling, Sebastian J. Devlin-Foltz, Sarah J. Pack, and Jeffrey P. Thompson) Finance and Economics Discussion Series, 86. 2015

"The Increase in Wealth Concentration, 1989-2013" (with Jesse Bricker, Alice Henriques, and John Sabelhaus) FEDS Notes 2015-06-05. Board of Governors of the Federal Reserve System. 2015.

“The Current State of US Household Balance Sheets” (with Kevin B. Moore, John Sabelhaus, and Paul Smith) Federal Reserve Bank of St. Louis Review, September/October 2013 Vol. 95, No. 5, pp. 337-359