We document large systematic variations in the return to single-family residential property within U.S. metropolitan areas. Areas with low income, low credit scores or high shares of black residents have higher yields and therefore higher returns. Yield spreads between low credit areas and high credit areas widened considerably during periods when the opportunity cost of credit widened most for low credit borrowers. The relationship between the local cost of credit and local expected returns also causes the areas with higher returns to also have higher risk, in sample. However we argue that the excess return that some areas earn is not purely compensation for bearing extra risk but is rather evidence for segmented housing markets where different local discount rates price local assets.
A common finding is that elasticity of house values to changes in local amenities depends on local area characteristics, perhaps due to complementarities, sorting or other preference-related mechanisms. We propose an alternative explanation based on differences in discount rates, based on several new findings. We document large spreads in the elasticity of house values over time and across areas. We show that these elasticity-spreads are likely driven by differences in household opportunity costs of credit and that the elasticity spreads widened during the housing bust, when differences in households’ abilities to access the mortgage market widened as well. Furthermore elasticity-spreads are much narrower for rents than for prices.
@unpublished{Halket2025,author={Halket, Jonathan},title={The Disparate Capitalization of Environmental Amenities into Real Estate Values - PDF version coming soon},year={2024},keywords={Pollution, Environment, Amenities, Capitalization, Market Segmentation, Credit Constraints},}
We use archaeological data from ancient settlements of three different historical eras on a Greek island to construct novel measures of consumption. Using these, we show that the shares of high-quality consumption goods were relatively more concentrated closer to the center of nucleated settlements as compared to low-quality consumption goods. There is no such pattern in a placebo settlement. In this unique setting, these quality gradients may reflect differences in household consumption baskets across these settlements. We argue that some alternative, trade or production based hypotheses for such gradients can be weakly ruled out based on our data and archaeological sources.
@article{GuptaHalket2023,author={Gupta, Abhimanyu and Halket, Jonathan},journal={Journal of Urban Economics},title={Household sorting in an ancient setting},year={2023},issn={0094-1190},pages={103548},volume={135},doi={https://doi.org/10.1016/j.jue.2023.103548},keywords={Spatial sorting, Luxury goods, Archaeology, Urban},url={https://www.sciencedirect.com/science/article/pii/S0094119023000177},}
2020
The Housing Stock, Housing Prices, and User Costs: The Roles of Location, Structure and Unobserved Quality
Which housing characteristics are important for understanding homeownership rates? How are housing characteristics priced in rental and owner‐occupied markets? What can answers to these questions tell us about economic theories of homeownership? Using the English Housing Survey, we estimate a selection model of property allocations to the owner‐occupied and rental sectors. Structural characteristics and unobserved quality are important for selection. Location is not. Accounting for selection is important for rent‐to‐price ratio estimates and explains some puzzling correlations between rent‐to‐price ratios and homeownership rates. These patterns are consistent with, among others, hypotheses of rental market contracting frictions related to housing maintenance.
@article{HalketNesheimOswald2020,author={Halket, Jonathan and Nesheim, Lars and Oswald, Florian},title={{The Housing Stock, Housing Prices, and User Costs:} The Roles of Location, Structure and Unobserved Quality},journal={International Economic Review,},year={2020},month=jul,doi={10.1111/iere.12475},publisher={Wiley},}
2015
Homeownership and the scarcity of rentals
Jonathan
Halket, and Matteo
Pignatti Morano di Custoza
The provision of owner-occupied versus rental houses is modeled as a competitive search economy where households have private information over their expected duration. With public information, households with low vacancy hazard rates pay lower rents and search in thicker rental markets. With private information, rentals are under-provided to long-duration households to discourage short-duration households from searching there. Ownership is attractive in part because it cures the private information problem. Using a novel data set of rental listings, we show that homeownership rates are high where rent-to-price ratios are low but rentals are scarce and that long-duration households sort into scarce rental markets. These patterns are consistent with the model only under private information.
@article{HalketPignatti14,author={Halket, Jonathan and {Pignatti Morano di Custoza}, Matteo},title={Homeownership and the scarcity of rentals},journal={Journal of Monetary Economics,},year={2015},volume={76},number={C},pages={107-123},doi={10.1016/j.jmoneco.2015.08.003},}
2014
Do Households Use Homeownership To Insure Themselves? Evidence Across U.S. Cities
Are households more likely to be homeowners when “housing risk” is higher? We show that home‐ownership rates and loan‐to‐value (LTV) ratios at the city level are strongly negatively correlated with local house price volatility. However, causal inference is confounded by house price levels, which are systematically correlated with housing risk in an intuitive way{: in cities where the land value is larger relative to the local cost of structures, house prices are higher and more volatile. We disentangle the contributions of high price levels from high volatilities by building a life‐cycle model of home‐ownership choices. We find that higher price levels can explain most of the lower home‐ownership. Higher risk in the model leads to slightly lower home‐ownership and LTV ratios in high land value cities. The relationship between LTV and risk is corroborated by LTV’s negative correlation with price volatility in the data and highlights the importance of including other means of incomplete insurance in models of home‐ownership.
@article{AmiorHalket13,author={Amior, Michael and Halket, Jonathan},title={Do Households Use Homeownership To Insure Themselves? Evidence Across U.S. Cities},journal={Quantitative Economics,},year={2014},volume={5},number={3},pages={631--674},month=nov,doi={10.3982/qe346},publisher={The Econometric Society},}
Saving Up or Settling Down: Home Ownership over the Life Cycle
In a Bewley model with endogenous price volatility, home ownership and mobility across locations and jobs, we assess the contribution of financial constraints, housing illiquidities and house price risk to home ownership over the life cycle. The model can explain the rise in home ownership and fall in mobility over the life cycle. While some households rent due to borrowing constraints in the mortgage market, factors that affect propensities to save and move, such as risky house values and transactions costs, are equally important determinants of the ownership rate.
@article{HalketVasudev14,author={Halket, Jonathan and Vasudev, Santhanagopalan},journal={Review of Economic Dynamics,},title={{Saving Up or Settling Down:} Home Ownership over the Life Cycle},year={2014},month=apr,number={2},pages={345-366},volume={17},doi={10.1016/j.red.2013.06.002},publisher={Elsevier {BV}},}
Technical reports
2018
Estimating the benefits of transport investment
Polly
Simpson, Lars
Nesheim, Jonathan
Halket, and Mateusz
Mysliwski
The National Infrastructure Commission commissioned a team of academics and researchers at the IFS and UCL to create a software tool that estimates how land values respond to changes in land purpose or infrastructure improvements. The tool is now available online.
@techreport{SimpsonEtAl2018_IFS,author={Simpson, Polly and Nesheim, Lars and Halket, Jonathan and Mysliwski, Mateusz},title={Estimating the benefits of transport investment},institution={Insitute for Fiscal Studies},year={2018},}
Older, sleeping papers
2014
Existence of an equilibrium in incomplete markets with discrete choices and many markets
We define and prove the existence of an equilibrium for Bewley-style models of heterogeneous agents in incomplete markets with discrete and continuous choices. Our sample model also features endogenous price volatility across many markets (locations) but still has a steady state equilibrium with a finite-dimensional state space. Our proof of existence uses Kakutani’s Fixed Point Theorem and does not require the set of households that are indifferent between two discrete choices to be measure zero.
@phdthesis{HalketExistence,author={Halket, Jonathan R},title={Existence of an equilibrium in incomplete markets with discrete choices and many markets},year={2014},month=mar,}
2006
Multivariate Fractional Cointegration and GDP Convergence
Tests of convergence in a time series framework are historically univariate and/or in an I(1)-versus-I(0) context. However, convergence hypotheses can and probably should be generalized to include multivariate, fractionally integrated processes. I propose several potential convergence definitions and use semi-parametric tests for bivariate and multivariate fractional cointegration in the G-7 countries. Results indicate possible convergence as well as highlight why other procedures may fail to find convergence.
@phdthesis{HalketCointegration,author={Halket, Jonathan R},title={Multivariate Fractional Cointegration and GDP Convergence},year={2006},month=may,}
2005
Plant Level Growth Rates - A case for disaggregating shocks
Plant and firm level growth rates exhibit significant fat-tailed behavior. I show that these tails still exist after conditioning on some standard explanatory variables like the age and size of a plant, and that the resultant distributions are well-described by a Laplace distribution. I then simulate a simple model which relaxes the standard central limit theorem by allowing for random numbers of random shocks.
@phdthesis{HalketPlantGrowth,author={Halket, Jonathan R},title={Plant Level Growth Rates - A case for disaggregating shocks},year={2005},month=may,}