How do collateral requirements impact consumer borrowing behavior? Using administrative loan application and performance data from the U.S. Federal Disaster Loan Program, we exploit a loan amount threshold above which households must post their residence as collateral. Our bunching estimates suggest that the median borrower is willing to give up 40% of their loan amount to avoid posting collateral. Exploiting time variation in the threshold, we estimate collateral causally reduces default rates by 36%. Finally, we structurally estimate households' attachment to their homes, net of any equity, and find a median value of $11,000. Attachment creates a wedge between lender and borrower valuation of collateral of 15%. Our results explain high perceived default costs in the mortgage market, and document the importance of collateral for reducing moral hazard in consumer credit markets.

Abstract The growing popularity of home-sharing platforms such as Airbnb, partly fueled by hosts’ ability to evade local taxes and regulations, has been shown to elevate housing costs by reallocating long-term housing units to the short-term rental market. This study assesses whether enhanced tax enforcement can mitigate this trend. We analyze staggered tax collection agreements between Airbnb and Florida counties, wherein Airbnb collects taxes from the hosts directly. Using a difference-in-differences methodology, we find these agreements significantly slow the growth of housing costs, highlighting the importance of tax policy in addressing the sharing economy’s influence on housing affordability.