The Unassuming Economist

On cross-country:

• Fundamental Drivers of House Prices in Advanced Economies – IMF
• Despite the substantial guidance international law has provided, there has been a severe lack of progress for the right to housing around the world – UN Special Rapporteur on Right to Housing
• Does promoting homeownership always damage labour market performances? – IDEAS

On the US:

• Credit Supply and Housing Speculation – NBER
• CityLab University: Inclusionary Zoning – CityLab
• ‘A win-win’: Using local church buildings to address the affordable-housing crisis – Washington Post
• A Housing Paradox in Progressive Cities – New York Times
• Why the low-income housing tax credit matters for rural communities – Urban Institute
• California’s SB 375 and the Pursuit of Sustainable and Affordable Development – Terner Center
• Meet Jenny Schuetz, new Rubenstein fellow in the Metropolitan Policy Program – Brookings
• Maybe We Should Give Up On NIMBY Cities – Forbes
• Coastal Oregon’s properties under threat by rising tides – Financial Times
• Americans have not forgotten that house prices can fall – Capital Economics
• New Hotel or Affordable Housing? Race Is On to Define ‘Opportunity Zones’ – Wall Street Journal
• Big Builders Are Remodeling the Housing Market – Wall Street Journal
• These Tax Laws Are Holding Back California’s Housing Market – Bloomberg
• The Longest Economic and Housing Expansions in U.S. History – Calculated Risk
• Booming housing market today presents serious risk for future – American Enterprise Institute
• AEI: First-time homebuyers are still in the game – American Enterprise Institute
• The Blob: 1998-1999. Presented at: Should Fannie Mae and Freddie Mac be Shrinking or Expanding Their Activities? – American Enterprise Institute

On other countries:

• [Australia] Property auctions are Sydney’s newest sport – Economist
• [Australia] Going, going gone for Australia’s house price boom. And some investors smell trouble – Reuters
• [Canada] Vancouver’s One-Two Punch Is Expensive Homes and Low Wages – Bloomberg
• [Canada] C. real estate group says market balancing out amid new mortgage rules, lower demand – Globe and Mail
• [Canada] Bank Of Canada’s Stephen Poloz Suggests Buying A Smaller Home, After Hiking Interest Rates – Huffington Post
• [Canada] Ontario throne speech ignores housing affordability – Fraser Institute
• [China] The Effect of Real Estate Prices on Chinese Bank Performance – Federal Reserve Board
• [China] China housing price growth edges up in June – Financial Times
• [Chile] Alcaldesa de Peñalolén y viviendas sociales: “Aquí el prejuicio es la palabra clave” – CNN
• [Ireland] Ireland’s volatile property market shows fresh sign of a surge – Financial Times
• [Lithuania] Housing Price, Credit, and Output Cycles: How Domestic and External Shocks Impact Lithuania’s Credit – IMF
• [New Zealand] Mortgagor Vulnerability and Deposit Affordability in New Zealand before and after the Loan-to-Value Restrictions – Reserve Bank of New Zealand
• [United Kingdom] New rules on equity release ‘could raise mortgage prices’ – Financial Times
• [United Kingdom] Car dependence and housing affordability: An emerging social deprivation issue in London? – University College London
• [United Kingdom] Defying London’s House-Price Decline – Bloomberg
• [United Kingdom] No affordable homes? We’ll build them ourselves – BBC

Photo by Aliis Sinisalu

From Conversable Economist:

“US emissions of carbon have been falling, while nations in the Asia-Pacific region have already become the main contributors to the rise in atmospheric carbon dioxide. These and other conclusions are apparent from the BP Statistical Review of World Energy (June 2018), a useful annual compilation of global trends in energy production, consumption, and prices.

Here’s a table from the report on carbon emissions (I clipped out columns showing annual data for the years from 2008-2016). The report is careful to note: “The carbon emissions above reflect only those through consumption of oil, gas and coal for combustion related activities … This does not allow for any carbon that is sequestered, for other sources of carbon emissions, or for emissions of other greenhouse gases. Our data is therefore not comparable to official national emissions data.” But the data does show some central plot-lines in the carbon emissions story.”

From VOXEU:

“When it comes to solving externalities like pollution, efficiency standards are more popular than taxes. The rationale behind this is that the burden of taxes would fall disproportionately on the poor. This column argues that standards are in fact more regressive than taxes. Given their lower cost, the results suggest that tax solutions should be favoured over efficiency standards.”

 

From the IMF’s latest report on Canada:

“Housing affordability is becoming an increasing social and economic concern in Canada. While Canada’s overall affordability rankings2 are not among the worst in its peer group, its
most dynamic regions, particularly around Vancouver and Toronto are severely unaffordable (Table 1). Moreover, some smaller housing markets are also becoming unaffordable, as demand pressures are spreading from the major markets to nearby markets. Deteriorating affordability raises not only important social concerns, but also economic ones, as it works against attracting and keeping talent in Canada’s most dynamic urban centers. Thus, it can have a negative effect on growth, productivity, and innovation. This note focuses on the housing markets in the Greater Toronto Area (GTA) and Greater Vancouver Area (GVA) where demand pressures have been the most acute.

Driving the deterioration of affordability has been the significant imbalance between housing demand and supply in the most affected regions. House prices nearly doubled between early 2010 and spring 2018 in Vancouver and Toronto as demand from domestic and foreign buyers outstripped the supply of homes. House price appreciation has been slower in other parts of the country, with virtually no appreciation in the resource rich areas in the same period.

Addressing housing supply constraints is a complex exercise. It will require complementary transportation, immigration, and housing strategies at all levels of government. Some of the constraints and bottlenecks can be addressed relatively easily e.g., by streamlining and
modernizing processes, establishing databases and information sharing. Others, such as accelerating rezoning and the delivery of serviced land are more difficult issues, as they reflect deeper structural constraints. Nevertheless, addressing housing supply issues should be handled as a matter of urgency as the social and economic costs of deteriorating affordability are increasing.”

From the IMF’s latest report on Canada:

“Housing market imbalances are prominent in Canada and are a key source of systemic
risk. Rapidly-rising house prices are usually coupled with rising household indebtedness (figure 1). High household debt raises the vulnerability of financial institutions to sharp corrections in house prices, and the interconnectedness of financial institutions make this risk systemic, not merely idiosyncratic. As such, agencies in charge of macroprudential policy/systemic risk oversight typically use macroprudential measures aimed at mitigating these risks to contain the build-up of vulnerabilities over time and enhance the resilience of the financial sector.

In addition to financial stability concerns, the rapid rise in housing prices has led to worsening housing affordability, posing a major problem to some of Canada’s most dynamic
metropolitan regions. Although Canada’s overall affordability indices are not yet among the worst globally, the Toronto and Vancouver regions are becoming severely unaffordable (figure 2). This raises important social and economic concerns.

The federal government has introduced a raft of macroprudential measures over the
past ten years to tackle growing housing market imbalances and associated risks to financial
stability. Initially, the measures were aimed at the high LTV ratio, government-backed insured mortgage market, helping to reduce the government’s exposure to the housing sector. In early 2018, the Office of the Superintendent of Financial Institutions (OSFI) tightened underwriting requirements for low-ratio mortgages to stem rising risk in the uninsured mortgage market. Low ratio mortgages are now subject to: (i) a stress test for mortgage interest rates; (ii) Loan-to-Value (LTV) measures and limits that reflect housing market risks, to be updated as housing markets and the economic environment evolve; and (iii) restrictions on combining mortgages with other lending products (e.g. co-lending arrangements) that could circumvent LTV limits (…).

The governments of British Columbia and Ontario have also recently deployed property-tax measures to stem speculative activity and improve housing affordability in their major cities. A 15 percent nonresident property-transfer tax was introduced for the Toronto and Vancouver areas between 2016–17. More recently, the British Columbia government increased the property-transfer tax on nonresident homebuyers to 20 percent and expanded its geographic coverage.

The question remains: Which policy—macroprudential policy or property-tax policy—
best satisfies the overall objectives of policymakers? This chapter develops a simple Dynamic Stochastic-General-Equilibrium (DSGE) framework to assess the effectiveness of a specific
macroprudential policy—an LTV limit—against property-tax measures. The model is estimated using Bayesian methods and Canadian data. Operational objectives are specified for the central bank, the macroprudential authority, and the property-tax authority (assumed to be provincial governments). Optimal policy experiments are conducted to assess the overall performance of each policy given the specified objectives.”