Thursday, December 26, 2019

Urban Economics for Curbed

Reading this: <https://www.curbed.com/2019/12/20/21031126/free-transit-universal-transportation-access>

Households spend a fixed amount of the household budget on housing+transportation. 30%+12%, IIRC. The trade-off between rents and transport costs is well known in urban economics. If you reduce transport costs, people are just going to spend more on housing. And given that, for housing, the stock dominates, the net effect will be more expensive housing, as households engage in competitive bidding for limited housing supplies. Yet all is not bleak: this very same relationship suggests that if we were to increase transportation costs (by tolling roads as we toll transit use), transportation costs would increase, resulting in lower rent costs. This would make housing more affordable, and given that housing prices are simply rents capitalized, would lower the housing values, which would, as one of the primary barriers to home-ownership is the initial cost, more home ownership more  accessible. 


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