A Columbia Business School Professor’s Quest to Find Efficiency in Affordable Housing
Working in the heart of New York City, just blocks away from some of the most valuable real estate in world, is a constant reminder of the problems with affordable housing. Stijn Van Nieuwerburgh, the Earle W. Kazis and Benjamin Schore Professor of Real Estate at Columbia Business School, address the issue first hand in a recent study, asking whether affordable housing can become more efficiency in an increasingly urbanized world.
“Can we improve the efficiency of the affordable housing system?” Van Nieuwerburgh asks in his latest study, “Affordable Housing and City Welfare.” Van Nieuwerburgh co-authored the study alongside Jack Favilukis of the Sauder School of Business at the University of British Columbia and Pierre Mabille of the Stern School of Business at New York University, which pivots the conversation away from a strictly cost conversation to one of social insurance.
“A lot of the previous models that have thought about these questions, haven’t really modeled risk, risk aversion, and insurance against risk,” Van Nieuwerburgh says. “That is what’s new here; it’s a finance perspective on the world.”
“Van Nieuwerburgh notes that people first sought out rent controlled or rent stabilized units when it was appropriate for their economic situation; but then over time, their careers progressed and they began to earned more. The research demonstrates that these very same renters tend to stay in the same unit when they can afford a market-rate unit, effectively taking the place of someone who earns less.”
A proposition from Van Nieuwerburgh in the study is that of a mean’s test, requiring applicants for an affordable housing lottery to earn within 30 percent of the proposed median income. Which, if successful, would allow needier applicants to earn higher priority, rather than keep tenants in housing built for people in lower income levels.
“That means that really needy people are going to get these units,” according to Van Nieuwereburgh.
“We can add everybody up, and we can see whether society is better off or not under this new policy,” he says. “The reason we’re better much off with this more efficient housing system is because poor people now get access to affordable housing units that they didn’t before.”
A primary difficulty with current proposals and changing rent laws, Van Nieuwereburgh argues, is that developers will have less economic incentive to build affordable housing if the demand increases while the cost of land in cities like New York continues to climb. His model also entails avoiding tax increases on wealthier residents, arguing that it disincentivizes upper-class earners and may not be more beneficial than voucher programs. However, despite the fiscally conservative framework, the study also advocates for potential solutions like “upzoning,” which can create more density in areas with tighter development laws.
You can read more about the affordable housing study, which was inspired by Mathew Desmond’s book Evicted, here.
Phoenix vs. San Diego: Where Should I Get My MBA?
With the number of high caliber business schools located out west, it may be hard to narrow down a city or region that best fits your needs as you seek your MBA. Here, we’ll take a look at two top cities for attending b-school—Phoenix and San Diego—with the hope of helping you find the best city for you.
How Woman Can Close the Pay Raise Negotiation Gap, and More – Chicago News
Let’s explore some of the most interesting stories that have emerged from Chicago business schools this week.
Are You Willing to Stretch the Truth While Negotiating? – Kellogg Insight
Research trends have found that men are more willing to lower personal ethical standards during negotiations than women when it comes to pay raise negotiation.
However, a new study from Northwestern University Kellogg School of Management‘s Maryam Kouchaki, Assistant Professor of Management and Organizations, finds that there’s a situation that throws a wrench in the works: “when women negotiate on behalf of others.”
Kouchaki and her UC Berkeley co-author Laura Kray write:
“A woman who is negotiating on behalf of someone else will lie at roughly the same rate as her male counterpart. But, if she is negotiating on her own behalf, she is much less likely to deceive. Women in advocacy roles [get] as much done as men.”
You can read more about Kouchaki’s pay raise negotiation research here.
Will EU Migrants Pay Their Fair Share of Taxes? – Chicago Booth News
The Chicago Booth Initiative on Global Markets surveyed its European Economic Experts Panel, which is comprised of “50 economists and top researchers,” about whether recent European migrants are likely to “contribute more in taxes paid than they receive in benefits and public services.”
LSE’s Daniel Sturm writes, “Being younger and typically better educated, their [the migrants’] fiscal contribution tends to be positive as suggested by recent research for the U.K.”
Goethe University Frankfurt’s Jan Pieter Krahnen agrees:
“As [the] employment rate among migrants goes up over time, and much of taxation is indirect anyway, chances are that the statement comes true.”
Director of the European IGM Panel Christian Leuz is less optimistic. “[It is] too early to tell. Labor market outcomes are often worse for [a] long time. Demographics are [a] plus. Much depends on fast integration into [the] labor market.”
You can read more from the panel’s discussion here.
Faculty and Students Team Up with Northern Illinois Food Bank – Quinlan School of Business News
Loyola University Quinlan School of Business’ Urban Social Benefit Incubator teamed up with the Northern Illinois Food Bank to develop a “new system for serving its families” to replace the precarious first-come, first-served process it currently employs.
Quinlan is proposing “an online ordering system that allows for pick-up at strategic locations in the community, such as a grocery store.”
Harry Haney, Associate Director of Quinlan’s Supply and Value Chain Center, who is helping spearhead the initiative, writes:
“It’s important to us to serve nonprofits and social enterprises to help make a difference in the community. Plus, our students are learning the real-world side of business and gaining additional educational exposure.”
You can read more about Loyola’s food bank initiative here.
Are Hidden Fees the New Normal? A New Columbia Study Investigates
How have hidden fees become such a normalized part of the consumer process? Columbia Business School recently investigated the unfortunately common practice.
According to new research, entitled “The Price Does Not Include Additional Taxes, Fees, and Surcharges: A Review of Research on Partitioned Pricing,” “consumer transactions are more likely to involve an additional surcharge now than they were two decades ago.” This evolution may not come as a surprise to most readers but our reactions to the practice known as “partitioned pricing” (PP) might. Fees related to cell phone service, baggage, fuel, and hotel accommodations, for instance, have become standard practice but we are still collectively parsing together how comfortable we are with PP.
Center for Decision Sciences Director and Professor Eric Johnson explains, “From regulatory efforts to pricing strategies, policy makers, researchers and marketing managers need to better understand the way that consumers evaluate and feel about partitioned pricing.”
Johnson’s research “identifies six different dimensions by which consumers experience partitioned pricing,” which could assist public policy makers, among others, “establish regulations to improve consumers’ understanding of PP, so long as they first understand at what stage the misunderstanding originates.”
Stage 1: Attention to different PP price components: “If consumers don’t comprehend the multiple pieces that compose total price, they are more likely to underestimate the total cost.”
Stage 2: Attitude toward the use of PP for this product: “From feelings about the fairness of surcharges to their perception of the seller, consumers come to the table with pre-conceived views about PP.”
Stage 3: How consumers combine price components to form a perception of total cost: “Whether people ignore surcharges or factor them into the total price, consumers arrive at an overall perception of a product’s total cost.”
Stage 4: How consumers evaluate product benefits: “When consumers evaluate a product, they may consider other attributes besides price, which may affect their perception of PP in overall cost.”
Stage 5: How consumers competitively evaluate the overall product offer: “This is the combination of stages three and four by which the consumer forms a full picture of the product.”
Stage 6: Post purchase perceptions of the firm and buying experience: “If consumers perceive PP to be unfair following a purchase, they will be more careful with future purchases that use PP.”
How the House Tax Cuts and Jobs Act Could Affect Grad Students
Days before the House of Representatives voted to pass the House Tax Cuts and Jobs Act on the morning of Thursday, November 16, budget experts at the Wharton School at the University of Pennsylvania broke down the proposed bill, discussing its broad potential impact.
The breakdown, per the Wharton Budget Model, focused on three principle findings:
- “This brief reports Penn Wharton Budget Model’s (PWBM) dynamic analysis of The House Tax Cuts and Jobs Act (TCJA), as amended and reported out by the Ways and Means Committee on November 9, 2017.”
- “After including the tax bill’s effects on economic growth, TCJA is projected to reduce revenues between $1.5 trillion and $1.7 trillion. Debt rises by about $2.0 trillion over the same period. Looking beyond the 10-year budget window, by 2040, revenue falls between $3.6 trillion and $4.4 trillion while debt increases by $6.4 to $6.9 trillion.”
- “In 2027, GDP is between 0.4 percent and 0.9 percent higher than with no tax changes. By 2040, the difference between GDP under the House tax bill and current policy is between 0.0 percent and 0.8 percent, due to larger debt.”
The research focused on broader implications, rather than zeroing in on how the bill potentially effects different socioeconomic classes. In conclusion, the research “projects that The House Tax Cuts and Jobs Act reduces federal tax revenue in both the short and long-run relative to current policy. In the near term, there is a small boost to GDP, but that increase diminishes over time.”
Brian Naylor at NPR notes that the bill was passed mostly on bipartisan terms, with Republicans in the U.S. House of Representatives largely pushing it through to the Senate without much push-back. “The vote was almost along party lines, with no Democrats voting in support of the bill and some GOP defections over provisions in the measure that would eliminate important tax deductions taken by constituents in some high tax states,” he writes.
The bill is less likely to pass in the Senate as it did in the House, according to reports from the New York Times. If it were to, however, the new legislation would directly affect graduate students across the board—including MBA students.
Section 117(d) of the bill, which can read here, indicates that all graduate students that receive any kind of tuition waiver will still have to pay taxes on the removed costs. For MBA students at schools like the Tepper School of Business at Carnegie Mellon University, this could mean a year-end cost increase of at least 25 percent, if not more. For students in Ph.D. programs, which often give tuition waivers to help bring in valuable research, the costs can be significantly higher, according to CNBC.
“This makes graduate school unattainable for anybody not already very well off,” 24-year-old grad student Kelly Balmes told NPR. “It also creates a diversity problem, which graduate STEM programs already have.”
Friday Morning News & Notes: Tax Day Looming, United Fiasco and Deadlines
Good morning and happy Friday!
Here are a few stories you may have missed from the week that was …
