Abstract

Loosening building regulations may alleviate some supply constraints and enhance housing affordability; however, allowing the construction of smaller and cheaper housing also leads to increased homogeneity. This homogeneous housing attracts increased interest from investment-driven buyers, as we demonstrate using Moscow’s case, a largely unregulated market with a homogeneous housing construction. Using data on newly built units, we find that speculative apartment reselling occurs more frequently in more homogeneous development projects. Employing a search and matching model, we demonstrate that higher homogeneity per se, while lowering market prices through poorer expected match quality, simultaneously increases investors’ bargaining power during resales. Our findings indicate that the presence of investment-driven sellers motivates developers to produce more homogeneous units at the expense of regular homebuyers’ welfare. In conclusion, we stress the importance of housing typology for policy outcomes.