Real Estate

34 Results

 

Housing Collateral, Credit Constraints, and Entrepreneurship-Evidence from a Mortgage Reform

One of the strongest findings in studies of entrepreneurship is the clear positive correlation between personal wealth and the propensity to engage in entrepreneurship. One study, for example, has shown that entrepreneurs comprise just under 9 percent of households in the United States, but hold about 40 percent of total net worth. The most common explanation for this correlation is that credit constraints pose an important barrier to entry for less wealthy individuals. However, others have questioned the degree to which financing constraints are barriers to entrepreneurship, particularly in advanced economies where firms have adequate access to capital. In this paper, the authors consider a unique mortgage reform in Denmark to study how increasing access to credit through the unlocking of housing collateral for personal loans had an impact on entrepreneurship. Findings show that the reform affected the ability to draw on debt backed by home equity. However, despite the positive and statistically significant effect of relaxing credit constraints on entrepreneurship, the magnitudes are small. Furthermore, an important reason for the small magnitude was that the marginal business founded by those who benefited from the reform was of lower quality, where the new entrants failed within two years of entry. Overall, the results paint a more nuanced picture of the extent to which financing constraints are important in settings with well-developed credit markets, and the role that home equity can play in alleviating these. Read More

Uncovering Racial Discrimination in the ‘Sharing Economy’

New research by Benjamin G. Edelman and Michael Luca shows how online marketplaces like Airbnb inadvertently fuel racial discrimination. Closed for comment; 1 Comment posted.

Digital Discrimination: The Case of Airbnb.com

To build trust and facilitate transactions, online marketplaces present information not only about products, but also about the people offering the products. Many platforms now allow sellers to present personal profiles, post pictures of themselves, and even link to their Facebook accounts. While these features serve the laudable goals of building trust and accountability, they can also bring unintended consequences: Personal profiles may facilitate discrimination. Benjamin G. Edelman and Michael Luca investigate the extent of racial discrimination against hosts on the popular online rental marketplace Airbnb.com. They construct a data set combining pictures of all New York City landlords on Airbnb with their rental prices and information about characteristics and quality of their properties. The authors use this data to measure differences in outcomes according to host race. Nonblack hosts are able to charge approximately 12 percent more than black hosts, holding location, rental characteristics, and quality constant. Moreover, black hosts receive a larger price penalty for having a poor location relative to nonblack hosts. These differences highlight the risk of discrimination in online marketplaces, suggesting an important unintended consequence of a seemingly-routine mechanism for building trust. Read More

The Fantastic Horizon: How to Invest in a New City

Rapid urbanization and resource scarcity pose problems—and opportunities—for businesses and governments all over the world. Senior Lecturer John Macomber writes about his recent investigative visits to nascent privately-funded municipalities in Saudi Arabia and Vietnam. Open for comment; 3 Comments posted.

Lehman Brothers Plus Five: Have We Learned from Our Mistakes?

Is the US financial system in better shape today than it was five years ago? Finance professors Victoria Ivashina, David Scharfstein, and Arthur Segel see real progress—but also missed opportunities and more challenges. Open for comment; 2 Comments posted.

Are First-Time Buyers Left Out of Real Estate’s Rebound?

Real estate is again on the move in the United States. Nicolas P. Retsinas examines the impact on home buyers, renters, and policymakers. Closed for comment; 2 Comments posted.

Video: Harvard Business School at the Kumbh Mela

In this video report, Senior Lecturer John Macomber visits the Kumbh Mela in India to discover what such an undertaking can teach us about real estate, urbanization, sustainability, and infrastructure. Open for comment; 8 Comments posted.

Why a Harvard Finance Instructor Went to the Kumbh Mela

Every 12 years, millions of Hindu pilgrims travel to the Indian city of Allahabad for the Kumbh Mela, the largest public gathering in the world. In this first-person account, Senior Lecturer John Macomber shares his first impressions and explains what he's doing there. Closed for comment; 12 Comments posted.

Affordable Housing: Israel and the United States

At a recent conference in Herzliya, Israel, Nicolas P. Retsinas, John H. Vogel, and Charles S. Laven joined residential developers, non-profits, national and local government officials, and academics to brainstorm approaches to affordable rental housing. Open for comment; 1 Comment posted.

LEED-ing by Example

When a local government decides to pursue environmentally aware construction policies for its own buildings, the private sector follows suit, according to new research by Timothy Simcoe and Michael W. Toffel. Closed for comment; 7 Comments posted.

Funding the Design of Livable Cities

As a burgeoning global population migrates to the world's urban centers, it's crucial to design livable cities that function with scarce natural resources. John Macomber discusses the critical connection between real estate financing and innovative design in the built environment. Open for comment; 4 Comments posted.

Stop Talking About the Weather and Do Something: Three Ways to Finance Sustainable Cities

How do we ensure that our cities are resilient in the face of inevitable future weather events like Hurricane Sandy? John Macomber offers three ways that the private sector can take action. Open for comment; 6 Comments posted.

Once a Castle, Home is Now a Debtors’ Prison

Forget the notion of the home as "castle." Twenty-two percent of Americans owe more on their mortgages than the value of their homes. Nicolas P. Retsinas offers ideas for how these "debtors' prisons" can be turned into productive housing. Closed for comment; 10 Comments posted.

Designing Cities for a Sustainable Future

The city of the past is likely not the city of the future—climate change is bringing an end to the traditional model. Harvard Business School faculty are thinking along with government leaders and business practitioners about how to create sustainable places to live and work. From HBS Alumni Bulletin. Open for comment; 8 Comments posted.

Water, Electricity, and Transportation: Preparing for the Population Boom

By 2050, the world's cities will have to support 3 billion more inhabitants, mostly in developing countries, with crucial investments needed in three areas: water, energy, and transportation. Several of the planet's top city planning and environmental business experts gathered at Harvard Business School earlier this month to discuss available options. Closed for comment; 18 Comments posted.

Keeping Credit Flowing to Consumers in Need

Regulators and policymakers are debating the best ways to revamp our damaged system of consumer and housing finance. The problem: turning the regulatory spigot too tightly could shut off the flow of needed credit to millions of lower-income Americans. A discussion with professor Nicolas P. Retsinas. Open for comment; 4 Comments posted.

Developing Asia’s Largest Slum

In a recent case study, HBS assistant professor Lakshmi Iyer and lecturer John Macomber examine ongoing efforts to forge a public-private mixed development in Dharavi—featured in the film Slumdog Millionaire. But there is a reason this project has languished for years. From the HBS Alumni Bulletin. Read More

The New Deal: Negotiauctions

Whether negotiating to purchase a company or a house, dealmaking is becoming more complex. Harvard Business School professor Guhan Subramanian sees a new form arising, part negotiation, part auction. Call it the negotiauction. Here's how to play the game. Read More

Systemic Risk and the Refinancing Ratchet Effect

During periods of rising house prices, falling interest rates, and increasingly competitive and efficient refinancing markets, cash-out refinancing is like a ratchet, incrementally increasing homeowner debt as real-estate values appreciate without the ability to symmetrically decrease debt by increments as real-estate values decline. This paper suggests that systemic risk in the housing and mortgage markets can arise quite naturally from the confluence of these three apparently salutary economic trends. Using a numerical simulation of the U.S. mortgage market, the researchers show that the ratchet effect is capable of generating the magnitude of losses suffered by mortgage lenders during the financial crisis of 2007-2008. These observations have important implications for risk management practices and regulatory reform. Read More

Business Summit: Real Estate

Experts discuss the global real estate crisis, the future of securitization, and predictions for the future of the U.S. real estate market. Read More

What Does Slower Economic Growth Really Mean?

Respondents to this month's column by HBS professor Jim Heskett came close to general agreement on the proposition that economic growth is not measured properly by GDP, calling for new indicators. Jim sums up. (Online forum now closed. Next forum begins July 6.) Closed for comment; 44 Comments posted.

Credit is Not the Bogey

"As we attempt to jump-start the economy of 2009, we should recognize both the risks and the advantages inherent in a robust credit industry," write HBS lecturer Nicolas P. Retsinas and Eric S. Belsky. The director and executive director, respectively, of Harvard University's Joint Center for Housing Studies, they offer a prescription for making credit neither too easy nor too hard to get. Read More

Consequences of Voluntary and Mandatory Fair Value Accounting: Evidence Surrounding IFRS Adoption in the EU Real Estate Industry

The required adoption of International Financial Reporting Standards (IFRS) in the European Union, effective January 1, 2005, resulted in a number of significant changes in how firms report their financial results. Mandatory IFRS adoption has been criticized for both the flexibility afforded under the standards and the encroachment of the fair value paradigm. Specifically, common accounting standards alone may not be sufficient to provide the benefits of common accounting practices. This paper examines the causes and consequences of different forms of fair value disclosures for tangible long-lived assets. Insights may assist standard setters and users in understanding the factors influencing firms' current and future accounting choices, and may also interest U.S. standard setters and managers of the almost 250 publicly traded U.S. real estate firms. Read More

Global Change in the Built Environment

The globalization of the real estate business was the theme of a recent Harvard Business School Centennial colloquium organized by professor Arthur Segel. He provides a summary of the three-day event. Read More

The Gap in the U.S. Treasury Recommendations

U.S. Treasury recommendations for strengthening the regulation of the financial system are a good start but fall short, says Harvard Business School professor emeritus Dwight B. Crane. Here's his suggestion for bringing regulation into the 21st century. Read More

Podcast: Revisiting Rental Housing

The subprime loan debacle, which has caused thousands of families to lose their homes, has cast light on another housing crisis in the U.S.: the lack of affordable rentals. In this podcast Harvard Business School professor Nicholas Retsinas discusses how this situation came to be, and his new book, Revisiting Rental Housing. Read More

A House Divided: Investment or Shelter?

For decades Americans viewed their homes as a safe harbor, a place to put down roots. But the last decade saw the rise of housing as an investment opportunity. What comes next? asks Harvard Business School professor Nicolas P. Retsinas, director of Harvard's Joint Center for Housing Studies. Read More

Building Sandcastles: The Subprime Adventure

The early days of the subprime industry seemed to fulfill a market need—and millions of renters became homeowners as a result. But rapidly escalating home prices masked cracks in the subprime foundation. HBS professor Nicolas P. Retsinas, who is also director of Harvard University's Joint Center for Housing Studies, lays out what went wrong and why. Read More

The New Real Estate

Real estate continues to defy revert-to-the-mean gravity to deliver handsome returns to investors. Professor Arthur I. Segel looks at the latest developments in the field and also considers several warning clouds that could darken the picture. Read More

When Rights of First Refusal Are a Bad Deal

Contracts that include a right of first refusal usually benefit the holder of that right. But not always. New research by professor Alvin E. Roth and colleague Brit Grosskopf explains when it's wise to say no. Read More

Rebuilding Commercial Real Estate

The commercial real estate business is awash with money and opportunity. Is this the calm before the bubble pops? Read More

Real Estate: The Most Imperfect Asset

Real estate is the largest asset class in the world—and also the most imperfect, says Harvard Business School professor Arthur Segel. He discusses trends toward institutionalization, environmentalism, and globalization. Read More

No Place Like Home: America’s Housing Crisis and Its Impact on Business

Affordable housing is a bottom-line issue, one that American business ignores at its own peril. New research and initiatives of HBS Professors William J. Poorvu and Michael A. Wheeler and others show why business needs to take a more provocative stance to assure that moderate- and low- income workers can afford to live near where they work. Read More