Essays in Real Estate Finance

Hair, Christopher

doi:https://doi.org/10.21985/n2-1epf-3d29

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Essays in Real Estate Finance

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This dissertation consists of three chapters that each study the interaction between government policy and real estate markets. All three chapters are connected by a broad interest in renters, landlords, and rental markets. Chapter 1 investigates the relationship between place-based policies and real estate and rental markets empirically by studying a large, spatially targeted education policy change in California. Specifically, I exploit the funding formula of California's largest school finance reform in decades, the 2013 "Local Control Funding Formula'' (LCFF), to estimate the effects of increased school funding at the local level. My estimates indicate an additional $1,000 per student in annual state grants increased local house prices by approximately 9%. The policy induced migration and increased total population, the number of children, and average family size in communities that received grants. Funding increases did not capitalize into rental prices during the study period (2013-2018), likely due to compositional effects of households that migrated because of the reform. These findings provide the first causal estimates of school finance reform on both rental and real estate markets and suggest the benefits of place-based policies are not necessarily offset by higher rents. Chapter 2 studies the effects of two of the most acute US government interventions in the rental housing markets in recent history: the COVID-19 eviction moratoria and the related emergency rental assistance (ERA) programs. Eviction moratoria and ERA programs were prominent policies implemented to assist families negatively impacted by the pandemic. I exploit the heterogeneous timings of state-level moratoria to determine their effects on tenant evictions and landlord financial distress. I find evidence eviction moratoria reduced tenant evictions, but increased the rate of financial distress among landlords. These effects are most pronounced in states where the local moratorium expired before the ERA program could commence. In such states, rental properties were 2.1% more likely to be sold during the pandemic. This suggests the ERA program likely had an important moderating effect on landlord sales and foreclosures during the COVID-19 pandemic. Finally, in Chapter 3, I turn my attention to policies set by homeowners and condominium associations. Approximately 60% of new US single-family construction is part of a homeowners association. These private associations collect monthly or annual fees from residents, have broad power to set rules and regulations for the community, and often own significant portions of land or common elements on behalf of the community. Membership is typically compulsory and transferred to new owners upon the sale of an existing property. I study common covenants, rights, and restrictions among New York City and Chicago associations to determine whether these non-governmental regulations have a material impact on housing availability, financing, or use. I particularly focus on restrictions that limit the ability to rent units.

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