New Delhi, India March 23-25, 2011

The Politics and Economics of Land and Housing March 24, :00 Noon – 1:45 p.m.

By Robert H. Edelstein Fisher Center for Real Estate and Urban Economics University of California, Berkeley

A. International Context B. Demand Drivers C. Supply and Legacy Effects D. Public Sector Multi-faceted Roles

 World Demographic Drivers Retirement Health Care India Demographic Dividend  International Resource Competition Energy Supply and Demand Protein Upgrade Pollution Control Clean Industry Inflation Scenarios

 Housing Demand is a Derived Demand  Income, Financial Resources, and Housing Prices  Transportation Networks  Congestion/Density/Quality of Life

Income Distribution  Middle Class  Urban vs. Rural Demographic  Growth Rate  Age Distribution Hierarchy of Cities  Premier, Secondary, & Tertiary Areas

National Urbanization % Urban Population

India, China: Age Distribution Source: World Bank

 Land Use Density Determinants – Transportation Network Land Usage Rules and Practices Construction Industry and Technology Spatial Employment Distribution Technological Component  Existing Ownership Patterns and Land Use Governance  Competitive Hierarchy of Cities  Industrial Location and Mix Export/Import Models

 Demand Side Policies The Singapore Model The U.S. Private-Public Model  Supply Side Policies Land Use Planning, Use Control, and Management Infrastructure Optimization  The Regulatory Functions of the Residential Financial System The U.S. Great Depression Structuring vis-à-vis the Subprime Crisis Consumerism and Financial Rights Financial Institutional Oversight Secondary Market Organization and Monitoring

 A singular feature of the residential market in Singapore is the existence of a small private housing sector alongside a large state-sponsored and regulated public housing sector. Almost 86% of Singapore’s population live in public housing.  Capital gains from the HDB (public) secondary market are a significant factor in easing entry into higher quality private housing.  Public housing supports upward mobility from entry level housing; helps generate initial wealth accumulation.  Public housing is key determinant of overall housing market dynamics.

 Supply side Developer Tax credits for low income housing units Redevelopment programs with tax increment financing set asides for housing (package deals) Local fair share and below market rate requirements  Demand side Homeowner mortgage interest tax credit First-time homebuyer credits (temporary) Mortgage guarantee system and GSEs Rental housing vouchers

 Impact of zoning Stringent quality standards can reduce supply Allocation of land to non-residential uses Fiscal zoning, i.e. stress on commercial usage  Clear relationship between regulatory bottlenecks, land-use regulations and supply elasticities on one hand and house prices on other

Source: Bardhan, Edelstein and Kroll from from U.S. Department of Transportation Smart Growth America

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17 HOUSEHOLD DEBT AND INCOME Sources: IMF, ADB, Euro Stat, CEIC, TIM Analysis