RESEARCH

Working Papers

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

Rising interest rates in 2022 introduced large moving costs for homeowners with low,fixed-rate mortgages. Using a novel dataset linking mortgage loans, consumer credit profiles, and property sales, we examine the effects of rate hikes on household mobility and the broader economic impacts of the resulting mortgage rate lock-in. As market rates rise relative to those on borrowers’ existing loans, likelihood of moving falls with the highest elasticity among borrowers just “in the money.” Our results suggest about44% of the decline in moves among mortgage holders between 2021 and 2022 may be attributable to the widening gap between borrower’s existing and market rates. We find limited scope for labor misallocation due to lock-in, as moves across labor market areas are rather unaffected. Instead, lock-in primarily reduces within-metro churn and moves up the housing ladder, leading to fewer real estate listings and greater house price growth. We explain lock-in-driven price increases through a housing search model: in a seller’s market, reduced churn raises market tightness, driving up prices. Consistent with such a model, we show measures of market tightness increase in response to lock-in, with the most significant effects in markets that were already tight.

Upzoning with Strings Attached: Evidence from Seattle’s Affordable Housing Mandate (with Betty Wang)
[Policy Brief Version]

This paper examines the impact of Seattle’s Mandatory Housing Affordability (MHA) program on new home construction and developer behavior. Implemented in 2017 and 2019 across 33 neighborhoods, Seattle’s MHA program relaxed zoning regulations (‘upzoning’) while requiring developers to either reserve some units of each project as below-market-rate rentals or contribute to a citywide affordable housing fund. Using a difference-in-differences approach, we find that new construction differentially declined in the upzoned, affordability-mandated areas. Our quasi-experimental border design reveals that developers intentionally avoided MHA-zoned areas – despite their upzoning– opting instead to build on nearby blocks without affordability requirements. The differential reduction in new housing permitting between MHA and non-MHA zones could be as large as 70%, with the low-rise multifamily segment driving most of this decline. Our findings underscore the complex trade-offs between increasing density and mandating affordable housing within the same development.

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.

In Progress

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

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

Peer Reviewed Publications

“Greater Wealth, Greater Uncertainty: Changes in Racial Inequality in the Survey of Consumer Finances” (with Aditya Aladangady and Andrew C. Chang) Journal of Economic Inequality, September 2024.

“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