Page 320 - 2019 6th AFIS & ASMMA

So, this brings me to my last section about housing policies and
the success of cities. First and foremost, I think it's very important to
understand what the role of affordable housing plays, not just for the
success of city but also for the success of the country itself, because the
cities are really the center of economic activity. So, what recent research
has shown is that there are at least three factors, when it comes to an
affordable housing that affects the competitiveness of cities. One is, of
course, if your housing is very unaffordable, it leads to a less flexible
labor market. People don't want to move anymore, because they think
that they will pay a higher rent in the new location, so the labor market
flexibility is reduced. Second, which is also an important point, is that
there is a certain capital misallocation; as the firms that have invested a
lot in housing see their assets going up in the value, firms might invest
in housing more than in other areas such as innovation and R&D, which
can lead to this capital misallocation. Finally, the urbanization as a
process of structural transformation; a lot of economies of agglomeration
will slow down, and this also hurts the overall welfare.
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So, what are the causes of housing unaffordability? There are many
factors and I just want to highlight two factors we often see. There are
very strict land use regulations; you cannot build beyond a certain
limitation. In Asia, we see a lot of increase in demand due to rapid
urbanization, but we also see that there are some bigger trends. For
example, we have more and more elderly households, we have more
and more singles that live in smaller apartments, and all these trends
push the demand for housing. So, what are the consequences for the
household itself? The household itself, of course, is forced to reduce the
non-housing consumption, and this morning we heard that sometimes,
it's a question of 'eat or heat'. We also have other negative consequences,
because you can spend less on health and education. And it even affects a
demographic decision; so people get married later, and they might have
less kids, because these kids also need to pay for expensive housing. So,
there are lot of negative effects, when it comes to unaffordable housing.
2019 6th AFIS & ASMMA Annual Meeting 323