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Developers, Wall Street and the Taxmen: A Theory of Real Estate Development
. (2018)
  • Marta Faias, Universidade Nova de Lisboa
  • Jaime Luque
We propose a general equilibrium model of commercial real estate development where developers from several jurisdictions compete to raise equity and non-recourse mortgage debt. In this setting, we investigate the determinants of differences in construction patterns across jurisdictions. We illustrate our result as a function of the CRE project specific equity delivery rate and the effective mortgage debt yield. Our equilibrium closed form solutions depend on parameters with relevant economic implications, such as the jurisdictions' property tax rates, the production economies of scale of CRE development, debt capacity constraints, productivity shocks to the
production and sale of commercial goods to local households, and the scarcity of construction inputs available in the economy. Finally, we highlight how global real estate markets can influence local jurisdictions' fiscal policies.
Publication Date
September, 2018
Citation Information
Marta Faias and Jaime Luque. "Developers, Wall Street and the Taxmen: A Theory of Real Estate Development" . (2018)
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Creative Commons license
Creative Commons License
This work is licensed under a Creative Commons CC_BY-NC-ND International License.