The amplifying effect of capitalization rates on housing supply

Büchler, Simon; v. Ehrlich, Maximilian; Schöni, Olivier (2021). The amplifying effect of capitalization rates on housing supply. Journal of urban economics, 126, p. 103370. Elsevier 10.1016/j.jue.2021.103370

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We provide empirical evidence that increases in housing rental income lead to a larger supply response than price increases of the same percentage value. We rationalize this differential in supply responsiveness with an amplification mechanism arising from a downward revision of capitalization rates following a rental income increase. We document that the amplification of the housing supply price elasticity is less pronounced in geographically constrained and tightly regulated neighborhoods and areas having more sophisticated investors. Our findings hold valuable lessons for public policies affecting the housing rental income, such as rent control and housing subsidies.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics
11 Centers of Competence > Center for Regional Economic Development (CRED)
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics > Economic Policy and Regional Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics > Public Economics

UniBE Contributor:

Büchler, Simon, v. Ehrlich, Maximilian, Schöni, Olivier

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

0094-1190

Publisher:

Elsevier

Language:

English

Submitter:

Melanie Moser

Date Deposited:

16 Sep 2021 13:05

Last Modified:

05 Dec 2022 15:53

Publisher DOI:

10.1016/j.jue.2021.103370

BORIS DOI:

10.48350/159370

URI:

https://boris.unibe.ch/id/eprint/159370

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