Essays on designing markets in housing and transit

Abstract

This dissertation investigates housing and transit markets. Chapter 1, joint with Andrew Ferdowsian and Luther Yap, considers the design of a large-scale public housing program where consumers face dynamic tradeoffs over apartments rationed via lotteries and prices. We show that changing rules complements increasing supply. By waiting for “better” developments arriving tomorrow, households forgo mediocre developments available today, raising vacancies. We formulate a dynamic choice model over housing lotteries and estimate it on data from Singapore. Under the existing mechanism, we find that increasing supply fails to lower wait times. However, when a strategyproof mechanism is implemented, vacancies and wait times fall, but prices on the secondary market rise. Under this new mechanism, building more apartments lowers wait times and reduces the upward pricing pressure on the secondary market. Chapter 2, also joint with Ferdowsian and Yap, considers the optimal allocation of public housing from the perspective of dynamic mechanism design. Novel in our setting: the designer can choose what types of apartments to supply, in response to earlier demand realizations. This control radically changes the optimal mechanism. In this mechanism, under-demanded housing is overproduced relative to a benchmark in which apartments are built in proportion to demand. Competition between housing applicants improves average match quality when the government controls supply. Competition can be artificially generated by batching applications, thus increasing market thickness. If the planner values match quality highly, the optimal mechanism features batching. Chapter 3 investigates the value of rail access in a transit system. Exploiting the universe of trips taken by bus and rail in the Singaporean transit system, I estimate an urban spatial model with heterogeneous workers by income. Workers commute and travel to consume non-tradable goods and services. Without the rail system, workers would suffer a 15\% decrease in welfare, driven by poorer access to consumption and employment opportunities. The city fragments in three: the downtown remains but is hollowed out. Removing the oldest trunk line also decreases welfare by 4.4\%. My results suggest that line placement matters for how improving transit infrastructure impacts welfare.