Essays on Mortgage and Housing Markets

Abstract

This dissertation consists of three essays that investigate the relationship between financial intermediaries, households, and real activity. In the first chapter, Pedro Gete and I show how reductions in the supply of mortgage credit increase rent growth and lower homeownership rates. We identify the effect using geographic variation in exposure to a regulation-induced contraction in bank lending. The second chapter, also joint with Pedro Gete, shows how a regulation-induced increase in the liquidity of mortgage-backed securities lowers shadow banks' lending standards and thus raises their market share. In the third chapter, I show that greater supply of financing for residential improvement projects has increased rental housing quality during a period when quality accounts for a significant share of real rent growth. I arrive at this finding by studying two natural experiments that increase the supply of bank credit and private equity financing for residential improvement projects. A common conclusion throughout these three essays is that financial intermediaries affect households and real activity through the market for real estate financing.