I examine how COVID 19 shock affected first-time homebuyers across markets with differing local land-use regulation. With a difference-in-differences empirical design, I find that rents rose faster than ownership costs in high-regulated markets from 2020 to 2022, strengthening incentives for renters to transition into homeownership. In main results, the share of first-time-buyer mortgages grows more in highly regulated areas than in less regulated ones. Additional evidence indicates that first-time buyers took on greater leverage (higher LTVs) and that, the composition may have shifted towards buyers with less liquid assets in these highly regulated locations. The main finding remains robust when using alternative measures of housing supply constraints.

This paper examines whether macroprudential policies (lower LTV ratio) influence future expectations in the housing market during Korea’s housing boom of the 2010s. From the unique Korean lease system known as Jeonse, I construct a more accurate rent-to-price ratio using the Jeonse deposit relative to housing prices (the Jeonse ratio). Exploiting a natural experiment based on a regulatory threshold, where apartment units priced above and below 900 million won are subject to different LTV limits, I assess the policy impact. The empirical results indicate that units under stricter regulation are associated with lower expectations of future housing price. These findings imply that while the Korean government may not have successfully curbed actual housing prices, it has effectively reduced housing price expectations.