Abstract
Residential location is economically important for households. It provides them access to local services, as well as to social and economic elements that influence their economic opportunities during their lifetime. Housing policies may create bar- riers for residential mobility that may create market inefficiencies such as lock-in effects or price distortions. This paper provides evidence on the effect of changing the incentives for residential mobility, using a natural experiment of public housing privatization in Israel. Buying an apartment at a discount was found to increase households’ probability to move. Most movers turned to other neighborhoods within their residential locality, while a small portion left to higher opportunity neighbor- hoods. Moving probability was greater from properties of lower physical quality, and was higher for young buyers, expecting a longer duration at the new location.
The unique policy setting and the rich administrative data allow deeper analysis compared to previous studies that sheds light on the potential effects of residential mobility disincentives existing in other affordable housing settings.
JEL Codes: R23, R28, H41.