Housing Production and Capital Allocation

摘要

The paper discusses the behavior of housing investment in the post - World War II era and examines the question of whether there is too much housing. The discussion is based on the premise that an optimal level of investment in housing will be achieved when the value of the marginal social benefit from the last unit of housing (the dollar value of present and future benefits) is equal to the marginal social costs of resources used in producing that housing. Findings suggest that it is impossible to provide a numerical answer to the question of whether there is too much housing, that a rapid growth in mortgage debt has occurred in recent years, and that the net average growth rate of residential capital has been declining. However, the average growth rate for the postwar years exceeds that of earlier periods. The paper documents how inflation interacts with the tax code to improve the relative after - tax return to homeownership. It notes that the rapid increase in the volume of mortgage debt reflects developments in the housing finance system that have improved the ability of households to use and arrange their wealth. Tables, graphs, footnotes, and 28 references are provided. (Author abstract modified).