There are millions of homes in the greater Bay Area in California. Â If thousands of newly minted Facebook multi-millionairesÂ seek their dream home in the area, how will local real estate prices change? Â The NY Times presents a strong article. Â Â In Â my 2011 piece, I present evidence that liberal cities tend to issue fewer housing permits than other communities. Â Albert Saiz has written an important paper documenting how Â topography influences housing supply. Â Â Combining the insights from both of these paper, Â there won’t be much new housing supply in response to this demand shock so existing homes will be bid up in price. Â Â What trickle down effects will this have on the rest of the market? Â Bay Area foreclosures should decline and incumbent home owners will gain a windfall. Â Property tax revenue will soar in these counties and this should help the local public schools. Â There is a huge public finance literature documenting that school quality is capitalized into home prices and this second round effect will further gentrify these areas. Â It will be a neat event study and somebody will publish a nice paper.
Switching subjects, I gave a Levine Lecture at UC Davis yesterday. Â Here are my slides for my talk about the economics of climate change adaptation.