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The economic implications of house price capitalization: a survey of an emerging literature

Hilber, Christian A. L. (2011) The economic implications of house price capitalization: a survey of an emerging literature. WP11CH1. Lincoln Institute of Land Policy, Cambridge, MA, USA.

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Identification Number: WP11CH1

Abstract

House price capitalization has long been thought to be a means of testing for efficiency in the local public sector. In this article I argue that the extent of house price capitalization itself may have important economic implications. In doing so I synthesize an emerging literature that explores the conditions under which public and private investments and intergovernmental transfers are capitalized into local house prices and the broader implications of such capitalization. The main insights are: (i) House price capitalization is more pronounced in locations with strict regulatory and/or geographical/physical supply constraints; (ii) capitalization can – under certain conditions – induce the provision of durable local public goods and club goods; and (iii) capitalization effects – which are habitually ignored by policy makers – have important adverse consequences for a wide range of policies such as intergovernmental aid or the mortgage interest deduction.

Item Type: Monograph (Discussion Paper)
Official URL: https://www.lincolninst.edu/
Additional Information: © 2011 Lincoln Institute of Land Policy
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
Sets: Departments > Geography and Environment
Research centres and groups > Spatial Economics Research Centre
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 09 Jul 2012 13:32
Last Modified: 09 Jul 2012 13:32
Funders: Lincoln Institute of Land Policy
URI: http://eprints.lse.ac.uk/id/eprint/44689

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