prof. dr. ir. A.J. (Arno) van der Vlist

I - Economics of Public Housing

My research program, Economics of Public Housing, addresses several economic questions inquiring into the provision of affordable housing. Many major cities are symbolic of the inequality and housing non-affordability which are jeopardizing households’ wellbeing while housing prices soar and market rents skyrocket. The situation is particularly problematic for low-income households. Public housing is sometimes seen as one of the instruments to alleviate inequality and provide housing to low-income earners. However, waiting lists for public housing are inordinately long. For example, waiting times in Amsterdam are well over 10 years, on average. Questions for which we’d like to provide answers are:

How to elicit the willingness to pay for public housing when rents are regulated?

The presence of price control prevents households from revealing their marginal willingness to pay for housing through market prices. We derive the households’ marginal willingness to pay using the intuitive idea that the length of the queue for a specific public housing unit reflects the willingness to pay for housing characteristics. We apply our methodology to public housing in Amsterdam and show that, on average, households’ marginal willingness to pay for a unit of public housing is close to its marginal costs.

How do lotteries affect who gets what?

Public house allocation is a classical allocation problem in nonmarket mechanism design, of how to allocate a limited number of houses among a large group of agents. In many cities public housing is allocated to registered households by a public housing authority using waiting lists. Waiting lists provide housing to registered households on a first-come first-served basis. In other cities public housing authorities use lotteries to assign public housing units to registered households. Local politicians are increasingly suggesting lotteries in situations with long waiting times, but it remains unclear whether lotteries are welfare enhancing. We examine the case of Amsterdam, where households on waiting lists have joined lottery experiments for some time and determine welfare outcomes.

What implications does nonmarket allocation mechanism have for neighborhoods?

The nonmarket allocation mechanism may include eligibility criteria governing who accepts a public housing unit. Eligibility criteria may comprise measures of household size and maximum household income thresholds. A current study focuses on a policy offering a quasi-natural experimental context in which eligibility criteria have changed, and associated policy outcomes are analyzed in terms of socio-economic consequences for the neighborhood.

Sustainable development goals SDG: No poverty, reduced inequality

JEL-code: C78, D82, R21, R31

Keywords: nonmarket allocation mechanisms, public housing, affordable housing, rent control, welfare effects, public policy

Papers

“Households’ willingness to pay for public housing” (with Jos van Ommeren). Journal of Urban Economics. 2016.

“Lotteries in public housing” (with Jos van Ommeren). Working paper, presented at AREUEA2017, ASSA2019, EEA2019, UG Groningen 2020, LISER Luxembourg 2022, UAB Barcelona 2023.

“Legacy and transitory effects of social housing for the neighborhood” (with Haocheng Chen, and Xiaolong Liu). Working paper. 2023.

II - Homebuying and Housing Finance

Homebuying constitutes one of the most important decisions for most households for various reasons. Housing provides shelter and is instrumental to family planning, schooling performance, and labor market careers. Furthermore, buying a house is rather lumpy, and typically involves complex financial instruments like mortgages. For most households, housing constitutes one of the largest financial assets with long term implications in terms of financial wealth and retirement planning. As such, housing has enormous policy relevance and is deemed critical to macroeconomic policy. Our research seeks to answer several questions, including:

Do uninformed buyers run financial risk?

Homeownership comes with a variety of financial risks, such as falling into negative equity and foreclosure. Also, in truth, not all buyers share the same information or are equally sophisticated in their use of available information. From a public economics perspective this has policy relevance in terms of designing housing counseling services to households. Clearly, whether buyers are informed or uninformed is not observed or measured directly in empirical research, and how to measure it forms a recurrent theme in academic research. We address this issue using different approaches. For example, we analyze house buyers during the 2000-2007 boom market who subsequently lost their property through foreclosure. We examine whether these buyers who were later foreclosed can be associated with higher house prices when purchasing their homes, and discuss whether this can be related to information asymmetry.

Are experienced buyers better informed?

Expectations about future nominal house prices play an important role in homebuying decisions. Do homebuyers reveal myopic or rational price expectations? The implications are not immaterial as expectations may explain cyclical behavior in housing prices and new construction. We address this issue in current and future research. We examine household survey data on expectations about future nominal house prices and relate these to actual price dynamics. We also seek to understand whether variation in expectations is associated with variation in experience and study the role of financial literacy.

 Do bargaining power differentials exist?

Bargaining power differentials between buyers and sellers form an alternative explanation for asymmetric information in observed housing price dispersion. We address this issue in current and future research by examining different types of agents that have been associated with bargaining power differentials. We analyze price differentials associate with different seller-buyer combinations; and inquire whether these price differentials across different seller-buyer combinations can be related to bargaining power differentials.

Sustainable development goals: Reduced inequality

JEL code: G10, R21

Keywords: housing wealth, housing returns, foreclosures, house price risks, housing inequality, asymmetric information, bargaining

Papers

“Bargaining power and segmented markets” (with G.K. Turnbull). Real Estate Economics. 2022.

“After the boom: Transitory and legacy effects of foreclosures” (with G.K. Turnbull). Journal of Real Estate Finance & Economics. 2023.

“The price of ignorance: Foreclosures, uninformed buyers and house prices” (with G.K. Turnbull). Journal of Housing Economics. 2022.

“House price expectations” (with Shuai Fang and Xiaolong Liu). Working paper. 2023.

III - Agglomeration, Investments and Sustainability

Market failures require policy measures able to ensure a sustainable future which delivers responsible production and consumption, aiming for resilient cities and communities. How to get there? Research seeks to answer the following questions:

How large are agglomeration benefits?

Agglomeration benefits – or the positive spillovers through clustering of activity – are considered a major driver for the existence of City Centers, Industrial Zones, Retail Malls, and Campuses. The research under this umbrella seeks to measure the size of agglomeration benefits and how these benefits vary across space. Professional property owners, such as real estate management companies, seek to exploit agglomeration benefits. This is perhaps best seen in retail malls, where investors maximize net operating income by specifically selecting (anchor) tenants and setting base and turnover rents. One of the projects addresses the benefits of retail mix and the presence of anchor stores on retail productivity to provide solutions to best exploit agglomeration benefits.

Do urban transformation and place-based investments benefit the neighborhood?

Urban transformation and gentrification results in direct and indirect spillover effects. How large are these? The answer to this question is important for property owners like real estate investors as well as public policymakers. We address housing and labor market effects using various place-based investments.

How to mitigate and adapt the disruptive nature of Climate change?

One of the most pressing societal questions is undeniably how to mitigate and adapt the disruption of climate change. Property markets provide a quasi-natural experimental context to address climate change-related policy questions and provide solutions to societal problems. Property is immobile and natural-hazard capitalizes in property prices. This forms a relevant source on which to draw when measuring the impacts of climate change on property prices.

Sustainable development goals: Sustainable cities and communities, responsible production and consumption.

JEL code: R1

Keywords: agglomeration externalities, place-based investments, climate finance, public policy

Papers

“Agglomeration economies and capitalization rates” (with D.A.J. Schoenmaker and M.K. Francke). Journal of Real Estate Finance & Economics. 2021.

“Tenant mix and retail rents” (with S. Zhang and M. van Duijn). Journal of Real Estate Finance & Economics. 2020.

“The external effects of inner-city shopping centers” (with S. Zhang and M. van Duijn). Journal of Regional Science. 2020.

“Retail externalities” (with N.M. Kuiper and M. van Duijn). Working paper. 2023.

“Natural hazards” (with M. van Duijn). Working paper. Presented at the UCF Symposium 2022.