This year’s Lusk Research Awards support research projects by USC faculty and PhD candidates. These research projects help support the mission of the Lusk Center, which is to advance real estate knowledge, inform business practice, and address timely issues that affect the real estate industry, the urban economy, and public policy.
Jung Hyun Choi, Postdoctoral Scholar and Research Associate, Sol Price School of Public Policy
Negative Equity and Household Consumption
This study examines whether and how underwater homeowners, especially those who also faced income reduction, altered their consumption behavior following the 2007 housing market crisis after controlling financial wealth. Numerous studies have documented that the default rate since the crisis has been remarkably low considering the substantial increase in the proportion of underwater households. In fact, after the crisis, many households continued to make their mortgage payment on time even though it may have been a better financial decision for them to walk away from their home. This indicates that many households especially those with low income are likely to have adjusted their consumption to continue making mortgage payments. Using the Panel Study of Income Dynamics, this study investigates whether underwater homeowners, especially those who also experienced income shocks, reduced their overall consumption in order to make their mortgage payments and if so, which category of consumption was most affected. To address potential endogeneity issues, the study uses several sets of instrumental variables for both home equity and residual income. The results will provide a greater understanding of how households change their consumption behavior when they are at risk of losing their home, an important consequences of the housing crisis which has been overlooked.
Matthew E. Kahn, Professor of Economics, Spatial Sciences and Environmental Studies, USC Dornsife College of Letters, Arts and Sciences
Hyungsik Roger Moon, Professor of Economics, Department of Economics, USC Dornsife College of Letters, Arts and Sciences
Estimating the Impacts of New Rail Transit Investment in Metropolitan Cities on Housing Prices
Urban rail transit investments are expensive and irreversible. Since people differ with respect to their demand for trips, their value of time, and the types of real estate they live in, such projects are likely to offer heterogeneous benefits to residents of a city. Using the opening of a major new subway in Seoul, we contrast hedonic estimates based on multivariate hedonic methods with a machine learning approach that allows us to estimate these heterogeneous effects. While a majority of the "treated" apartment types appreciate in value, other types decline in value. We explore potential mechanisms.
Gary Dean Painter, Director, USC Sol Price Center for Social Innovation, Price School of Public Policy
Rent Burden Impacts and Coping Strategies
The term “rent burden” describes those households paying over 30 percent of their monthly income on rental costs, which is regarded as a threshold after which households may be forced to make tradeoffs that significantly impact their quality of life. Research on the effects of rent burden has identified tradeoffs that households may make, but this research fails to provide a nuanced understanding of the processes and mechanisms underlying these decisions. For this reason, we still know very little about how residents cope with rent burden, the impacts that coping strategies have on households over the short and long-term, and how these strategies and their cumulative impacts may vary across geographies and populations. This project seeks to remedy this literature gap by using a detailed survey of rent-burdened households in the Coachella Valley and South Los Angeles to reveal coping strategies, and to understand the effects of rent burden on households. The comparative case study approach will enable us to test across differences in geographic, socioeconomic, and cultural factors that we believe may influence coping strategies. This inquiry will provide important insight into the cumulative vulnerabilities produced by rent burden and potential policy interventions that may alleviate its impacts.
Christian L. Redfearn, Borstein Family Endowed Professor of Real Estate, Sol Price School of Public Policy
Thomas D. Malone, Postdoctoral Fellow, Harvard University, Graduate School of Design
Think Globally, Aggregate Locally: Index Consistency in the Presence of Asymmetric Appreciation
This paper highlights the role of housing submarkets that are often overlooked in the construction of aggregate housing price indexes. These local dynamics can present sources of signi_cant bias in aggregate indexes if the sample of sold homes is not representative of the stock as a whole. We address both asymmetric appreciation and nonrandom selection across submarkets. We derive the conditions under which generalizing typically estimated parameters to the housing stock is possible, but provides evidence that these conditions are generally violated in practice. Speci_cally, it appears that internal metropolitan dynamics produce uneven appreciation and sales rates that lead to biased estimates of aggregate price because the sample on which they are based is representative neither of the stock nor its appreciation. The proposed solution is to estimate local indexes, aggregating these indexes by the housing stock they represent rather than by their share in the observed sample of sales. Local indexes better capture local hedonic pricing and land values than do the \global" indexes. Pooling local observations and the pooling the resulting local indexes suggest that submarket price and volume dynamics should not be ignored when making inferences about aggregate house prices.
Property Markets and Inequality in Urbanizing India
The rapid urbanization now under way in most of the developing world poses major methodological as well as substantive challenges for researchers. This project focuses on the changing urban form of cities in India and other developing countries, and the consequences for inequality. The analyses focus on two growing regions where foreign investment has played a prominent role in peri-urban markets for land and housing markets (Bangalore and Pune) and one where it has not (Coimbatore). The analyses combine two new data sources: a novel classification of types of housing derived from remote sensing images, and newly available data from online real estate listings services. A pilot analysis carried out over the past year employed an integrated combination of these data to analyze peri-urban land use transition in two matched districts at the edge of each of the cities. The proposed project will scale up the analyses throughout the three urban regions. In doing so, it will offer the first comprehensive overview of inequality in Indian urban property markets, and of the forms of new development that drive peri-urban growth there.
Raúl Santiago-Bartolomei, PhD Candidate, Sol Price School of Public Policy
The role of micro-entrepreneurship in emerging land markets: A case study of rental markets in Havana, Cuba
The Government of Cuba has recently allowed its citizens to buy, sell, and rent property as part of a broader set of reforms that foster land market liberalization and micro-entrepreneurship by way of self-employment. For the Cuban government, this set of policies addresses the dual goals of creating wealth and increasing the housing stock. Such changes, however, could favor one goal to the detriment of the other. My research will assess how the formalization of rental markets and micro-entrepreneurship in Cuba affects access to affordable housing and the possibilities of market entry for landlords. I will develop hedonic pricing models using online rental ads to analyze the interactions between short- and long-term rental markets in Havana. I will also survey property owners to analyze the dynamics of their social network, as well as interview state and non-government actors involved in the emerging land market and review existing policies to assess barriers to market entry. Results from this research project would provide insight into possible spillover effects from property regularization in urban areas, as well as possible institutional barriers that hinder entry to housing rental markets in transitioning economies.
Seva Rodnyansky, PhD Candidate, Sol Price School of Public Policy
Do NIMBYs vote with their feet when LIHTC comes to town?
Externalities produced by the siting of affordable housing have been debated in the economics literature for some time. Diamond and McQuade (2016), in a national analysis, show that the effects of Low Income Housing Tax Credit (LIHTC) properties on housing prices and crime vary by neighborhood income. Woo et al. (2016) describe the effects of LIHTC on neighborhood stability measured via home sales, with their results indicating higher turnover in areas with affordable housing projects. My proposed research asks: Has the siting of LIHTC properties in Los Angeles County since 1993 been a negative externality that changes the demand for living in the adjacent neighborhood and causes an outflow of households? If so, is this a general phenomenon or is it limited to wealthier households? My analysis shifts the measurement of externality to mobility as rather than housing prices or crime. Methodologically, I use a unique household-level administrative database of tax data annually for Los Angeles County from 1993-2013 to improve on previous methodologies. I liken the potential household out-movement to a NIMBY phenomenon and test Tiebout’s (1956) theory that residents vote with their feet in light of an amenity change in their neighborhood.
Bingbing Wang, PhD Candidate, Sol Price School of Public Policy
The effect of retail service on nearby property values
In this article, we test whether housing values are affected by the proximity to retail projects. We analyze the effects with differences in distance between the housing and the retail, the size, and the qualities of the retail. We employ the data from Data Quick for the housing prices and retail data from the International Council of Shopping Centers (ICSC). For the quality effect, we specifically investigates the effect difference of Whole Foods and Walmart. We expect that the effects are not negative and Whole Foods exerts a larger effect than Walmart.