Journal of Financial Economics Vol. 142 No. 1 2021
Finance and the supply of housing quality
Abstract
I show how financial intermediaries affect rental housing quality and affordability by supplying real estate investors with financing for quality improvement projects (i.e., renovations). First, I document a historic surge in improvement activity since the Great Recession. Then, using exogenous variation generated by a 2015 change in regulatory capital requirements, I find that a reallocation of bank credit toward improvement projects accounts for 24% of quality improvements since 2015. The shock increases the supply of high-quality apartments and lowers their rent. However, it raises the average apartment’s rent and accounts for 32% of historically high rent growth over 2015–16.
- DOI
- 10.1016/j.jfineco.2021.04.022
- Volume
- 142
- Issue
- 1
- Pages
- 357-376
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib