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 Housing Allowances: Quasi-Experimental Evidence VATT working paper
coauthored with Essi Eerola, Teemu Lyytikäinen, Tuukka Saarimaa

This paper studies the effects of housing allowances on rents. Our research design is based on a reform that made the allowance more generous for small housing units as a quasi-experimental setting. We find that large increases in housing allowances for small housing units have little or no effect on their rents relative to larger units. Thus, the incidence of the reform is largely on allowance recipients and not on their landlords. Consistent with very moderate rent effects, we do not find evidence of recipient households responding to the increased incentive to choose small units. A possible explanation is that optimization frictions and short expected allowance spell duration limited demand responses to the reform.

Housing Search And Liquidity in Spatial Equilibrium Draft available upon request
coauthored with Thierry Magnac

Housing market segments differ in their liquidity, the ease of transacting. Transacting is often easier in more urban locations, for example. Better liquidity could be either due to exogenous segment characteristics, like higher matching efficiency in thicker markets, or due to endogenous segment popularity among buyers. We set up a model of housing search in the cross-section of multiple market segments that encompasses both mechanisms to rationalize the negative correlation of prices and sales times in the cross-section of cities. We show that the model is partially identified from segment-level observables. Taking the model to data in Finland, we find that the housing market in Finland consists of very heterogeneous segments, but differences in segment-level popularity (market tightness) contribute to liquidity differences more than differences in matching technology. Accounting for heterogeneity in market characteristics and spillovers between segments is important: a positive housing demand shock in some segments translates to decreased demand and longer sales times in others through changes in equilibrium sorting.