Out-of-Town Home Buyers and City Welfare

63 Pages Posted: 11 Sep 2017

See all articles by Jack Y Favilukis

Jack Y Favilukis

University of British Columbia (UBC) - Division of Finance

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); ABFER

Multiple version iconThere are 2 versions of this paper

Date Written: September 2017

Abstract

The major cities of the world have attracted a flurry of out-of-town (OOT) home buyers. Such capital inflows affect housing affordability, the spatial distribution of residents, construction, labor income, wealth, and ultimately welfare. We develop a spatial equilibrium model of a city with substantial heterogeneity among residents. We calibrate the model to the New York and Vancouver metro areas. The observed increase in OOT purchases is associated with 1.1% (5.0%) higher house prices and a 0.1% (0.34%) welfare loss in New York (Vancouver). Taxing OOT buyers can turn welfare losses into gains when tax revenues finance a local public good.

Keywords: affordable housing, Dynamic spatial equilibrium, foreign investors, Gentrification, House Prices, property taxes

JEL Classification: G11, G12, H41, H70, J61, R10, R20, R30, R40, R51

Suggested Citation

Favilukis, Jack Y and Van Nieuwerburgh, Stijn, Out-of-Town Home Buyers and City Welfare (September 2017). Available at SSRN: https://ssrn.com/abstract=3035279

Jack Y Favilukis (Contact Author)

University of British Columbia (UBC) - Division of Finance ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business ( email )

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Uris Hall 809
New York, NY New York 10027
United States

HOME PAGE: http://https://www0.gsb.columbia.edu/faculty/svannieuwerburgh/

National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

ABFER ( email )

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Singapore

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