Regulating speculative housing markets via public housing construction programs : insights from a heterogeneous agent model

Carolin Martin and Frank Westerhoff

Since the instability of housing markets may be quite harmful for the real economy, we explore whether public housing construction programs may tame housing market fluctuations. As a workhorse, we use a behavioral stock-flow housing market model in which the complex interplay between speculative and real forces triggers realistic housing market dynamics. Simulations reveal that plausible and well-intended policy measures may turn out to be a mixed blessing. While public housing construction programs may reduce house prices, they seem to be incapable of bringing house prices much closer towards their fundamental values. In addition, these programs tend to drive out private housing constructions.

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Year of publication:	2018
Authors:	Martin, Carolin ; Westerhoff, Frank H.
Publisher:	Bamberg : Bamberg Economic Research Group, Bamberg University
Subject:	Housing markets \| boom-bust dynamics \| extrapolative and regressive expectations \| heterogeneous agent model \| policy experiments \| public housing construction programs \| Wohnungsmarkt \| Housing market \| Soziale Wohnungspolitik \| Social housing \| Theorie \| Theory \| Wohnungsbau \| Residential construction \| Agentenbasierte Modellierung \| Agent-based modeling