Research

Working papers and work in progress

House Prices and Rents in a Dynamic Spatial Equilibrium Draft
Honorable mention (finalist) for the Best Student Paper Award at Urban Economics Association 2023 European Meeting

House prices and rents do not always comove across locations and over time. To study the causes and welfare consequences of rent and price variation, I set up a quantitative dynamic spatial equilibrium model of housing demand and supply. In the model, price-to-rent ratios can vary because of differences in expected rental growth or discounting, and data on prices, rents, migration and construction contain identifying power to separate the two. I take the model to data in the case of Finland, where house prices have been diverging across regions, even if rents have not. Through the lens of the model, the rapid price divergence between big and small cities can be rationalized as the combination of an increase in the value of living in cities and regionally diverging discount rates. These changes have led to an important regional divergence in both renter welfare and housing wealth across smaller and larger cities.

The Incidence of Rent Subsidies: Evidence on Rents, Housing Choices and Supply Working paper
coauthored with Essi Eerola, Teemu Lyytikäinen, Tuukka Saarimaa

This paper asks whether, and under which circumstances, rent subsidies to low-income households increase rents. We utilize a reform in Finland that caused large quasi-random variation in housing allowances. We find that large increases in allowances for affected housing units had little or no effect on their rents relative to other units. Thus, the incidence of the reform was on allowance recipients. The reform led to only small changes in recipients' housing choices, and at most modest changes in rental supply. Rent subsidies can be effective even in supply-constrained contexts, if housing choices are unresponsive to the subsidy.

Housing Search And Liquidity in Spatial Equilibrium Working paper
coauthored with Thierry Magnac

Local housing markets differ in their liquidity, the ease of transacting. Transacting is often easier in urban rather than rural locations, for example. To rationalize these liquidity differences, we set up a model of housing search in the cross-section of multiple interconnected local markets. Markets vary in structural characteristics, leading some to be in higher demand than others, which in turn affects equilibrium liquidity across local markets. Taking the model to data in Finland, we find that the housing market consists of very heterogeneous segments, and especially the value of housing services and the efficiency of the meeting technology matter for the cross-sectional variation in liquidity. Accounting for equilibrium buyer sorting is important: characteristics like the value of housing services affect liquidity both directly but also by attracting more prospective buyers into the market.