New Delhi, IndiaMarch 23-25, 2011

The Politics and Economics of Land and Housing

March 24, 201112:00 Noon – 1:45 p.m.

ByRobert H. Edelstein

Fisher Center for Real Estate and Urban Economics

University of California, Berkeley

A. International ContextB. Demand DriversC. Supply and Legacy EffectsD. Public Sector Multi-faceted Roles

World Demographic Drivers• Retirement• Health Care• India Demographic Dividend

International Resource Competition• Energy Supply and Demand• Protein Upgrade• Pollution Control• Clean Industry• Inflation Scenarios

Housing Demand is a Derived Demand Income, Financial Resources, and

Housing Prices Transportation Networks Congestion/Density/Quality of Life

• Income DistributionMiddle ClassUrban vs. Rural

• DemographicGrowth RateAge Distribution

• Hierarchy of CitiesPremier, Secondary, & Tertiary Areas

National Urbanization%Urban Population

India, China: Age Distribution

Source: World Bank

Land Use Density Determinants –• Transportation Network• Land Usage Rules and Practices• Construction Industry and Technology• Spatial Employment Distribution• Technological Component

Existing Ownership Patterns and Land Use Governance

Competitive Hierarchy of Cities Industrial Location and Mix

• Export/Import Models

Demand Side Policies• The Singapore Model• The U.S. Private-Public Model

Supply Side Policies• Land Use Planning, Use Control, and

Management

• Infrastructure Optimization The Regulatory Functions of the Residential

Financial System• The U.S. Great Depression Structuring vis-à-vis

the Subprime Crisis• Consumerism and Financial Rights• Financial Institutional Oversight• Secondary Market Organization and Monitoring

A singular feature of the residential market in Singapore is the existence of a small private housing sector alongside a large state-sponsored and regulated public housing sector. Almost 86% of Singapore’s population live in public housing.

Capital gains from the HDB (public) secondary market are a significant factor in easing entry into higher quality private housing.

Public housing supports upward mobility from entry level housing; helps generate initial wealth accumulation.

Public housing is key determinant of overall housing market dynamics.

Supply side• Developer Tax

credits for low income housing units

• Redevelopment programs with tax increment financing set asides for housing (package deals)

• Local fair share and below market rate requirements

Demand side• Homeowner

mortgage interest tax credit

• First-time homebuyer credits (temporary)

• Mortgage guarantee system and GSEs

• Rental housing vouchers

Impact of zoning• Stringent quality standards can reduce supply• Allocation of land to non-residential uses• Fiscal zoning, i.e. stress on commercial usage

Clear relationship between regulatory bottlenecks, land-use regulations and supply elasticities on one hand and house prices on other

New York- Newark

Phoenix

Chicago

Miami

Philadelphia

Washington, DC

Detroit

San Francisco-Oakland

Houston

Tampa-St. Petersburg

St. Louis

Sacramento Portland

San Jose

Orlando

Indianapolis

Buffalo

Jacksonville

1517192123252729313335

75 125 175 225

Daily Vehicle-Miles of Travel

per Capita

Residential Density Factor

Source: Bardhan, Edelstein and Kroll from from U.S. Department of Transportation Smart Growth America

16

17

HOUSEHOLD DEBT AND INCOME

Sources: IMF, ADB, Euro Stat, CEIC, TIM Analysis