PPP loan fraud drove home price inflation in some markets, study suggests

U.S. dwelling costs rose by 24% between November 2019 and November 2021, in response to the Federal Reserve Financial institution of San Francisco, pushed by components corresponding to shifting demand and regional strikes.

Nonetheless, authorities support might have additionally contributed to that development, together with larger charges of fraudulent PPP loans in sure areas, in response to the brand new analysis.

The paper discovered that sure markets had elevated charges of PPP mortgage fraud, and people who obtained fraudulent loans had been extra prone to have bought property.

“It is a very particular kind of stimulus that injected money into sure areas, and it appears to have performed a reasonably vital function,” Kruger mentioned.

ZIP codes with “excessive suspicious lending per capita” had dwelling worth development that was 5.7% larger than ZIP codes in the identical county with decrease ranges of fraud, the paper discovered. “This impact is massive relative to different proposed components explaining home worth development in the course of the Covid interval,” the authors wrote.

The findings had been constant after weighing components corresponding to land provide, earlier dwelling worth development, distant work entry, inhabitants density, web migration, proximity to the central enterprise district and prior charges of distant work.

“It isn’t simply that you just’re stealing cash from the federal government,” Kruger mentioned. “There are potential distortions and spillover results which can be affecting different folks locally.”