"How Do Homes Transfer Across The Income Distribution? The Role of Supply Constraints"

(with Alicia Rambaldi)

We study how homes transfer across the income distribution. Positing a search model of trade, homes can be resold down or up depending on home quality and land values. Constraining new supply raises land values, trade-reservation values, and increases the odds that homes transfer up. Using transaction data from Australia, we estimate substantial dispersion in income differences between sellers and buyers within and across locations, with over one half of all homes transferring up to a buyer with higher income than the seller. Causal estimates of the effects of planning refusal suggest supply constraints can explain the upward transfer of homes.