1. | 1 Nonmarket allocation and the willingness to pay in regulated housing markets Jos N van Ommeren and Arno J van der Vlist Department of Economics Department of Economic Geography VU University University of Groningen j.n.van.ommeren@vu.nla.j.van.der.vlist@rug.nl ERES – July 4, 2013

2. Regulated housing in Global cities Households cannot reveal their true willingness to pay

3. Literature on regulated housing markets ›Random housing allocation -> misallocation (Glaeser and Luttmer, 2003) ›Rent control in private regulated housing -> limited housing supply (Olsen and Barton, 1983; Gyourko and Linneman, 1989)

4. This paper ›Methodology that exploit the queueing time to estimate the households’ marginal willingness to pay (MWP) ›Present and compare results for households’ MWP for regulated housing vis-a-vis private housing in Amsterdam Metropolitan Housing Market 14/12/2015 | 4

5. Model outline Housing market Number of households N 0 Private market vs. regulated market Regulated housing is preferred over private Households in queue stay in private market v= v (X,r) with market value X and rent r Number of regulated housing N 1 < N 0 v > v 0

6. Model - households Households’ lifetime utility V Private market Regulated market

7. Model – households’ optimal queueing time Maximizing lifetime utility V with respect to queueing time Max τ(v) gives τ(v)

8. Model – housing market Steady state Housing market n v /τ(v) households receive a house offer N v /[T-τ(v)] households leave the housing market Excess demand equals queue: In steady state: n v /τ(v) = N v /[T-τ(v)] ∂n v /∂v = ∂n v /∂τ(v) * ∂τ(v)/ ∂v > 0

9. 14/12/2015 | 9 ∂n v /∂v = ∂n v /∂τ(v) * ∂τ(v)/ ∂v > 0 Model –towards an empirical model From households’ maximization we have From the steady state housing market condition we have It follows that

10. Empirical model τ(v) Queuing time X property tax appraisal value r regulated rent - +

11. Data

14. Estimation results

15. Robustness analysis ›Eligible vs noneligible households (low- high income) ›Tobit analysis for Censoring duration

16. Estimation results

17. Conclusion ›Queueing time can be exploited to estimate the MWP for housing in regulated markets ›Queuing time varies with market value + and rent – ›MWP for regulated housing is close to the annual capitalization rate for private housing [4.7-6.2] ›Households pay about (2/3) of MWP so that inefficient housing consumption is most likely