Researchers are joining forces to better study the economics of housing

Housing is a key issue for the French population and a priority for public authorities. The research devoted to it, spread across several universities, needed to be strengthened. Three universities – Aix-Marseille University, Sciences Po (via the LIEPP) and Toulouse 1 University – decided to create a joint laboratory to pool knowledge and coordinate future research. Through its participation in this project, the Laboratory for Interdisciplinary Evaluation of Public Policies (LIEPP) will seek to evaluate the wide spectrum of public policies in this area. Explanations.

Public policies aiming to reduce inequalities

Housing is a crucial target of French public policies: in 2014, 40 billion euros – around 2% of GDP – was devoted to it. This significant investment reflects collective social preferences. The need to access decent and affordable housing is essential. Housing is a “primary good”, that is, indispensable to each individual and a vital instrument of social justice.
Proper housing in neighborhoods free of noise and other disturbances also improves children’s educational performance and prospects, which further increases the need for public intervention to correct these externalities.
Many instruments are deployed: low-income housing, taxes and subsidies to rent or purchase a home, rent control, low-income housing quotas for municipalities, etc. While each of these measures has (more or less) been evaluated, an overarching, aggregate and dynamic vision is missing. A long-term vision is also lacking. In order to close these gaps, the LIEPP decided to participate in ECHOPPE (EConomics of HOusing and Public Policy Evaluation), a project whose originality is to bring together the greatest research capabilities to meet this challenge – those of three universities: Aix-Marseille University, Sciences Po and Toulouse 1 University.

A joint laboratory

This joint laboratory should help compensate for a gap: indeed, research in the economics of housing is conducted in many French research centers, but is often less developed than research in other areas like labor economics. With financial support from the French National Research Agency, the ECHOPPE project will help deepen the knowledge about housing economics by fostering exchanges between researchers. The contribution of Sciences Po’s Laboratory for Interdisciplinary Evaluation of Public Policy (LIEPP) to ECHOPPE will be to improve economic research by implementing the interdisciplinary approaches practiced at LIEPP for over five years now. Sociology and political science in particular will help shed light on public decisions and their implementation

Evaluating the impact of housing policies over a long term

The impact of housing policies is generally studied over the short term, with the help of what one might call quasi-natural experiences, using sudden and unanticipated legislative changes. The mid- to long-term impacts on efficiency or redistribution have been understudied.
For example, for housing allocations, only studies on short-term effects have been available to date, but none of them examine the feedback processes that would allow for the measurement of these effects over a longer tern. The idea is to fill this gap by deepening understanding of the long-term impacts of housing policies on housing inequalities in France and in different countries.
The idea is to build a model of lifecycle decisions that households make over time regarding their homes, by emphasizing lifecycle issues. Such a model, which has only recently emerged in the United States, has not yet been developed in France. It will enable evaluation of the long-term impacts of public policies on the reduction of housing inequalities. For example, the effects of allocations or zero-interest loans for first-time buyers will be studied. This modeling work will be supplemented by extensive documentation on these questions in different countries over the past few years.

Between the housing offer and individual preferences

Two other aspects will also be developed. The first will consist of taking into account the housing supply and, more specifically, residential investment. The interest in doing so is to be able to analyze the effect of public subsidies, such as tax incentives, on the amount, size and quality of new housing offered, while taking into account the quality of the environment.
A second dimension will develop more solid models and more specific estimates of household preferences in order to refine knowledge about individual tradeoffs and preferences.

Low-income housing and rent control

The project will also address two key elements of French housing policies: low-income housing and rent control.
A first part will study the interactions between housing policies and construction programs modeled as resulting from political mechanisms (voting, electoral campaigns) between municipalities where owners and renters have radically different preferences. Using spatial voting theory, our project will be the first to study the interactions between housing policies and local elections. Another objective will be to analyze these interactions by replicating this “game” over time. The temporal dimension is a key factor in the policies implemented by local authorities. The same goes for individual decisions such as a move insofar as it involves significant costs for households.
The second part will explore the issue of the economic geography of price variations in housing and rent in agglomerations by mobilizing data on housing and rent costs gathered online. The use of these data will improve our understanding of urban unemployment and the way in which daily home-workplace commutes affect employment in cities.