Housing Search and Rental Market Intermediation
Rental brokers as the matchmakers between tenants and landlords contribute 80% of the rental listings in certain markets, but how they smooth the search friction and transmit policy impacts is not well understood. This paper is the first to use a listing-agent matched data set from an online platform to show the heterogeneous impact of the listing capacity of a broker, i.e. the agent size, on the rental market outcomes. I document that brokers with greater listing capacity are related to lower rents and shorter listing duration. The dispersion cannot be fully explained by the amenity difference of rentals and points to a sizable agent impact that a broker with greater capacity lists a rental at a lower rent. I develop a search model that features a search-and-matching process in which the capacity constraints of brokers interact with the tenant coordination friction. The capacity constraints differentiate brokers’ ability to coordinate tenant search. The smaller rent premium for listings by larger brokers reflects the capacity benefit that larger brokers coordinate tenant search better by reducing the likelihood of facing a binding capacity constraint. An endogenous agent distribution of the listing capacity, which summarizes how frictional the rental market is, arises in the model. I evaluate the counterfactual effects of two rental market policies. First, I show that expanding the brokerage sector will not benefit tenants in the search process. As the mean agent size decreases, the rental market becomes more frictional. Second, I evaluate the impact of shifting the commission liability from tenants to landlords, which is central to the New York rental market reform. As the equilibrium rent increase cannot fully compensate the commission cost on landlords, the policy decreases rental supply and makes searching tenants worse off. I characterize the optimal allocation of the broker’s fee and show that brokers with greater listing capacity should list more rentals with the fee paid by landlords.
Land Use Regulation, Regulatory Spillover and Housing Prices, with Susan Wachter (Wharton) (Revise and Resubmit at Regional Science and Urban Economics)
We estimate the effect of city land use regulation on housing prices in the presence of regulatory spillover. The total effect of regulation is decomposed into a direct effect in which regulation lowers housing productivity and an indirect effect in which household location choice mitigates the price effects of regulatory restrictions. Using housing sales data from California, we structurally estimate a closed-form housing price equation based on a housing model with spatial arbitrage. We find that the total price effect of a one standard deviation increase in city restrictiveness is 9.3% on average, ranging from 4.1% to 14.4% across cities. The spillover effect is economically significant, with the size of the indirect effect equal to 21% of the direct effect for an average city, ranging from 0 to 47%. We point to the importance of identifying direct and indirect effects by controlling for regulation in surrounding locations. For jurisdictions with the power to impose regulation on a larger number of locations, regulation has a stronger price impact due to limits on regulatory spillover.
Mortgage risk premiums during the housing bubble, with Adam Levitin (Georgetown) and Susan Wachter (Wharton) (Journal of Real Estate Finance and Economics, 2020)
How did pricing for mortgage credit risk change during the years prior to the 2008 financial crisis? Using a database from a major American bank that served as trustee for private-label mortgage-backed securitized (PLS) loans, this paper identifies a decline in credit spreads on mortgages conditioned on loan and borrower characteristics. We show that observable risk factors, FICO score and loan-to-value ratio, had less of an impact on mortgage pricing over time. As the volume of PLS mortgages expanded and lending terms eased, risk premiums failed to price the increase in risk.
Endowments and Minority Homeownership, with Arthur Acolin (UW) and Susan Wachter (Wharton) (Cityscape, 2019)
Fifty years after the adoption of the 1968 Fair Housing Act that prohibits discrimination in the housing market, homeownership rates have not increased for Black or Hispanic households. The current homeownership rate for Black households is 42 percent, identical to the 1970 census reported level, and 48 percent for Hispanic households, lower than that in 1970. Using data from the 1989, 2005, and 2013 American Housing Surveys, we identify the extent to which group differences in household endowments account for persistently low minority homeownership levels.
Housing Boom, Mortgage Default and Agency Friction
The housing prices and the mortgage credit witnessed faster growth than GDP in the run-up of the Great Recession. I document a mortgage market puzzle during the boom period: (1) the mortgage risk measured by the ex post delinquency increased, but (2) the mortgage spread decreased. The default risk premium alone cannot explain the decreasing mortgage spread in the boom episode. I develop a dynamic general equilibrium model of the housing and the mortgage markets with borrowers, depositors, and intermediaries to explain the empirical fact. The model features the tightness of the lending condition and the mortgage risk as the aggregate shocks, which generate the time-varying liquidity and default premiums in the mortgage spread. I quantify the contribution of the aggregate risks to the boom-bust dynamics before and after the Great Recession. A plausible size of the income shock alone is insufficient to generate the observed movement in the mortgage spread. The model shows that lending relaxation that eases the leverage constraint of an intermediary leads to the increasing mortgage credit and the decreasing mortgage spread in the boom period. The lending condition shock generates pro-cyclical leverage of intermediaries that amplifies the aggregate shocks in the boom-bust dynamics.
Public Finance, Penn, TA for Prof. Hanming Fang (Fall 2020)
Urban Real Estate Economics (Undergrad/MBA), the Wharton School, TA for Prof. Susan Wachter (Spring 2018-Spring 2020)
International Housing Comparisons (Undergrad/MBA), the Wharton School, TA for Prof. Susan Wachter (Spring 2019-Spring 2020)
Intermediate Microeconomics, Penn, TA for Prof. Rakesh Vohra and Kenneth Burdett (Fall 2016-Spring 2017)
Intermediate Microeconomics, UC Santa Barbara, TA for Prof. Kelly Bedard (Spring 2015)
Microeconomic Theory I & II (Graduate), UC Santa Barbara, TA for Prof. Zach Grossman and Cheng-Zhong Qin (Fall 2014-Winter 2015)
Principle of Macroeconomics, UC Santa Barbara, TA for Prof. Javier Birchenall (Spring 2014)
Principle of Microeconomics, UC Santa Barbara, TA for Prof. Jon Sonstelie (Fall 2013-Winter 2014)
2019-2020: 14th Meeting of Urban Economics Association, Philadelphia; 2020 ASSA-AEA Meeting, San Diego; 2020 ASSA-AREUEA Meeting, San Diego; 36th ARES Meeting, Fort Mayers (canceled)
2018-2019: 2018 Midwest Macroeconomics Meetings, Nashville; 13th Annual Economics Graduate Students Conference, WUSTL; 2019 ASSA-AREUEA Doctoral Session, Atlanta; 3rd Annual PhD Conference on Real Estate and Housing, OSU; 47th AREUEA National Conference, DC; ESCP-TAU-UCLA Conference on Low-Income Housing Supply and Housing Affordability, Madrid Spain
2017-2018: 46th AREUEA National Conference, DC
AREUEA-ASSA Conference, San Diego
14th Meeting of Urban Economics Association, Philadelphia
Honors and Awards
Mack Institute PhD Research Fellowship, the Wharton School (2020)
GAPSA Research Travel Grant, Penn (2019-2020)
Doctoral Travel Grant, AREUEA (2019)
SASgov Travel Grant, Penn (x2) (2018-2020)
SAS Dean’s Travel Subvention, Penn(x2) (2017-2019)
Xinmei Zhang Fellow, Penn, Penn (2017-2019)
Thormahlen Family Fellowship in Economics, UC Santa Barbara (2014-2015)
Graduate USAP Fellowship, UC Santa Barbara (2013-2014)
Macroeconomics, Urban Economics, Household Finance, Real Estate Economics
Department of Economics
The Ronald O. Perelman Center for Political Science and Economics
133 South 36th Street, Office 535
Philadelphia, PA 19104