How Regional Inequality and Migration Drive Housing Prices and Rents

Greg Howard and Jack Liebersohn

Journal of Economic Perspectives, 2025, vol. 39, issue 3, 3-26

Abstract: We argue that rising regional inequality contributes to higher average housing prices and rents. We show three key empirical facts that contribute to this mechanism: first, income growth has been faster in already high-income cities; second, people are drawn to these cities by the income growth, raising relative housing demand and relative housing prices and rents; and third, housing supply in these cities is inelastic due to density and regulation, so these cities have not produced the housing to match the rising demand. We illustrate the resulting changes using a graphical spatial model in which rising regional inequality reallocates population toward high-income, supply-constrained areas. This shift raises national average housing prices and rents.

JEL-codes: D31 R12 R21 R23 R31 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/jep.20241426 (application/pdf)
https://doi.org/10.3886/E230944V1 (text/html)
https://www.aeaweb.org/articles/materials/23692 (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:jecper:v:39:y:2025:i:3:p:3-26

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

DOI: 10.1257/jep.20241426

Access Statistics for this article

Journal of Economic Perspectives is currently edited by Enrico Moretti

More articles in Journal of Economic Perspectives from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().