Recent trends in housing prices and wages have made it increasingly difficult for moderate-wage workers such as teachers and police officers to afford housing in the communities in which they work. Commonly referred to as the workforce housing problem, the inability of many communities to provide housing affordable to essential workers has exposed a number of weaknesses in the current urban economics literature. Specifically, little is known about the determinants of the supply of affordable housing and the extent to which wages adjust to differences in housing prices and commutes. Composed of three essays addressing various aspects of the workforce housing problem, this dissertation marks an attempt to address these weaknesses.
In the first essay, I discuss the administration and results of a survey I designed to gain a greater understanding of the extent of workforce housing problems in Florida. Administered in the spring of 2008, this survey solicited valuable information about a myriad of housing and labor force issues from nearly 13,000 educators throughout the state. These data reveal that a large fraction of Florida's teachers spend more than 30 percent of their income on housing, with many of these individuals also enduring lengthy commutes. These problems appear to be particularly acute in southern, coastal counties.
The second essay of the dissertation investigates the determinants of the affordable housing stock, attempting to answer the question: What makes a community affordable? Following a critical review of the affordable housing literature, I develop an econometric model of affordable housing supply. Results from the empirical models indicate that, consistent with theory, wealthier jurisdictions and locales with higher construction costs are less affordable. Results suggesting that stringent land use regulations may reduce the stock of affordable housing are also advanced.
The third essay in this dissertation investigates the extent to which wages respond to differences in housing prices and commute times. To motivate the empirical modeling, a theoretical spatial equilibrium model of compensating differentials is developed and a number of testable hypotheses are derived. These hypotheses are then tested using a rich set of data that includes information on salaries, commute times, and neighborhood housing prices for more than 100,000 educators throughout the state of Florida. Results from these empirical models confirm the theoretical predictions, as educators receive compensating differentials for living in high cost areas and enduring lengthy trips to work. Additionally, differences in the estimated size of compensating differentials across models highlight the importance of recognizing the endogeneity of locational variables in wage equations; failure to do so leads to downwardly-biased estimates of the differentials.