An Empirical Analysis of Real Estate, Regulation, and the Environment

My dissertation analyzes the impact of incentives and regulation on the mortgage market and the urban environment. In the first essay I explore the spatial determinants of the lender's incentives to foreclose in mortgage markets. There are two types of agents in mortgage markets, lenders and borrowers. Borrowers choose whether to pay their mortgage each month or default, and lenders conditional on the borrower's decision, decide whether or not to seize the property following default, or foreclose. Lender's in the mortgage market make profit maximizing decisions about when to seize the mortgage of delinquent borrowers after they default on the loan. I show that lender's understand pecuniary spillovers from the foreclosure decision on housing prices in the neighborhood of the property, and that the lender responds to these spillovers when they have a large financial stake in the neighborhood surrounding the loan.;To show this I utilize a unique dataset on mortgage loan performance that allows me to identify the lender and servicer of every loan in the sample. Further, the data contain information on whether the lender holds each loan on its balance sheet, in portfolio, or has sold the loan to investors. I define the financial stake the lender has in a given neighborhood as the total count of loans the bank holds in portfolio in that neighborhood. In my work, a neighborhood is defined as a zip code. In a reduced form model I show that, all else equal, the pecuniary externality may decrease the probability of foreclosure by as much as 11% for loans in neighborhoods with the mean number of portfolio loans. I show that this effect is not present for loans in neighborhoods where the bank has little to no financial stake, and that it is robust to many different specifications.;In the second essay we explore the effects of land use regulation. The California Coastal Commission was created in 1976 to protect the coastline and to regulate land use within an established coastal boundary zone. We utilize this exogenous and well defined regulatory boundary to study the consequences of land use regulation on nearby housing located in the same political jurisdiction. Using two different geocoded datasets, we document gentrification within the boundary and discuss possible explanations for these patterns. Using a panel of census tracts from 1970 to 2000 we are able to compare outcomes for census tracts within and outside of the boundary both before and after the boundaries creation in 1976.;We find that, all else equal, census tracts within the boundary experience greater growth in housing values, household income, and housing construction. We further strengthen these results by running a similar comparison between census tracts above and below the state median income level in 1970. If our results were simply due to a gentrification process, we should not expect to see differential changes relative to these "rich" tracts in our control period. We find robust evidence in favor or our results. In addition we exploit a geocoded dataset of housing transactions in Los Angeles county to construct a Regression Discontinuity Design (RDD) similar to Black (1999) to compare outcomes for houses transacted in close proximity on both sides of coastal boundary zone. Using our RDD approach we find that homes on the inside of the boundary tend to be both newer, and more expensive. We take this as evidence of both a supply and demand effect on housing within the regulated coastal area.;In the third and final chapter I expanded my work on environmentalists communities to distinguish between altruistic green consumers concerned with the greater good, and those consumers motivated by reputation, or a desire to appear to be green. We exploited a unique survey dataset of household electricity consumption and environmental attitudes to classify the demand for two different green products, observable solar panels and unobservable purchases of green electricity, into these categories. We find that consumers of solar panels, which are fully visible to your community, are much more likely to be motivated by reputation, and that consumers of green electricity are more altruistic on average.;To identify these effects we exploit the fact that solar panels are fully observable to ones neighborhood, while green electricity purchases are only observable on the electricity bill. We show that, all else equal, the demand for green electricity depends significantly on one's own environmental ideology, and not at all on the average ideology of one's neighbors, while the demand for solar panels depends significantly on neighborhood ideology, while not at all on one's own environmental ideology. This effect is robust across both high and low electricity demanders. (Abstract shortened by UMI.).