Nimbyism, Baby Boomers and Housing Inequality
Abstract: We study the role the political economy constraints have played in the housing market and its impact on intergenerational inequality. We develop a lifecycle model in which the supply of new housing is determined by a democratic vote of local households whose vote is governed by how an increase in the price of housing will affect their lifetime expected utility. Simulating the impact of a temporary increase in the birth-rate, we find that a baby boom distorts the housing market in favour of the boom generation and their parents, while their children see a decrease in their net worth and homeownership rate. Projecting forward we forecast that the continued aging of the population will increase the house price to income ratio by a further 10% over the next 80 years.