Journal of Finance Vol. 73 No. 2 2018
Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls
Abstract
I empirically analyze how changes in access to housing collateral affect homeowner borrowing behavior. To isolate the role of collateral constraints from that of wealth effects, I exploit the fully anticipated expiration of resale price controls on owner‐occupied housing in Montgomery County, Maryland. I estimate a marginal propensity to borrow out of housing collateral that ranges between $0.04 and $0.13 and is correlated with homeowners' initial leverage. Additional analysis of residential investment and ex‐post loan performance indicates that some of the extracted funds generated new expenditures. These results suggest a potentially important role for collateral constraints in driving household expenditures.
- DOI
- 10.1111/jofi.12602
- Volume
- 73
- Issue
- 2
- Pages
- 523-573
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib