I am a housing/urban economist at University Erlangen-Nuremberg. My main research interests are housing policies, the role of housing supply, the functioning of local housing and labor markets, and housing choices. Currently, I am lead researcher in the DFG-funded research project „Who Benefits from New Housing Supply?“.
The Impact of New Housing Supply on the Distribution of Rents Link
How much new supply do German cities need in order to keep real rent growth constant?
This study investigates the impact of new housing supply on the local distribution of rents. It is part of the DFG-funded project „Who Benefits from New Housing Supply?“. The main question is whether new housing supply by private markets does effectively reduce rental prices of relatively cheaper housing units. I find that this is the case. This suggests that relaxing constraints to new housing supply can help greatly to reduce the housing cost burden of low-income households.
I estimate the impact of market-rate new housing supply on the local rent distribution. As an exogenous shifter of new housing supply, I exploit local weather shocks during the construction phase that lead to temporary delays in housing completions at the municipal level. Adding one new housing unit to the stock for every 100 rental housing units offered on the market in a given month reduces rents by 0.4-0.7%. A series of instrumental variable quantile regressions show that shocks to new housing supply shift the rent distribution as a whole, suggesting that market-rate new housing supply effectively reduces housing costs of all renter households. I rationalize this finding by analyzing moving decisions in the German Socio-Economic Panel. The housing quality at a household’s previous address is a poor predictor of the housing quality at the current address, suggesting that new housing supply triggers supply of (rental) housing units across the housing quality spectrum.
Decomposing Local House Price Dynamics in England
joint with Christian Hilber
Variation in real house prices in Greater London that cannot be explained by the state of the local labor market
Exploiting a unique panel data set on local house prices in England since 1974, we analyze the relative importance of local labor demand, macroeconomic factors, and housing supply constraints for the evolution of local house prices. We then study the remaining variation in house prices at the regional level, finding important cyclical behavior in this component. In locations with stricter regulatory constraints to housing supply, this „unexplained“ component of local house prices tends to increase more quickly during national-level housing booms. [Working paper coming soon.]
We test to what extent the extraordinary growth in real house prices in England—especially in London and the South East of the country—is driven by local fundamentals vis-à-vis macroeconomic factors. Employing a unique panel dataset of 353 Local Planning Authorities (LPAs) in England between 1974 and 2018, LPA and year fixed effects, and an instrumental variable-strategy to identify endogenous local supply constraints, we reaffirm an earlier finding that house prices respond much more strongly to given labor demand shocks in LPAs with tight local regulatory constraints and physical barriers to development. We find that the ‘unexplained variation’ in house prices at macro-level—captured by the year fixed effects—is quantitatively important and strongly positively associated with variables that capture the real economy. Holding the latter constant, credit conditions explain at most 30% of the remaining variation in aggregate house price growth and the mortgage interest rate does not matter in a statistical sense, while conditional on credit conditions, the real economy explains 36% of the remaining variation. An analysis of the residuals from the baseline specification further reveals that the affordability crisis in Greater London cannot be substantively driven by global investor demand and interactions of the interest rate with local supply constraints are economically unimportant. When we replicate our baseline analysis with rental data, we obtain qualitatively similar results.
Rent Control, Market Segmentation, and Misallocation: Causal Evidence from a Large-Scale Policy Intervention
joint with Claus Michelsen and Konstantin Kholodilin
The rents in newly built units increased after the rent cap was introduced, relative to a control group
The recent housing booms in many large cities around the world have led to various policy responses. One tool that is used very often is rent control. We study a particular form of rent control, where buildings constructed before a certain date are not subject to the controls, so that owners of such units can choose freely the rental price. Theory suggests that rent control can increase rental prices in the exempted units. Exploiting the introduction of rent control in Germany in 2015 [„Mietpreisbremse“], we show that this mechanism is relevant empirically. The project was the basis for the 2019 evaluation of the German rent control law (joint with Claus Michelsen/DIW Berlin). Working Paper AEA P&P
This paper studies market segmentation that arises from the introduction of a price ceiling in the market for rental housing. When part of the market faces rent control, theory predicts an increase of free-market rents, a consequence of misallocation of households to housing units. We study a large-scale policy intervention in the German housing market in 2015 to document this mechanism empirically. To identify the effect we rely on temporal variation in treatment dates, combined with a difference-in-differences setup and a discontinuity-in-time design. By taking a short-run perspective, we are able to isolate the misallocation mechanism from other types of spillovers. We find a robust positive effect on free-market rents in response to the introduction of rent control. Further, we document that rent control reduced the propensity to move house within rent controlled areas, but only among high-income households. Interpreted through the lens of our theoretical model, this spillover is a clear sign of misallocation. Further, we document that the spillover brings forward demolitions of old, ramshackle buildings.