The Impact of Increases in Housing Prices on Income Inequality: A Perspective on Sustainable Urban Development

Gökhan Ünalan (), Özge Çamalan and Hakkı Hakan Yılmaz
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Gökhan Ünalan: Department of Public Finance, Atilim University, Ankara 06830, Türkiye
Özge Çamalan: Department of Economics, Atilim University, Ankara 06830, Türkiye
Hakkı Hakan Yılmaz: The Economic and Policy Research Foundation of Türkiye, Ankara 06830, Türkiye

Sustainability, 2025, vol. 17, issue 9, 1-21

Abstract: This study examines the impact of housing price increases on income inequality using the dynamic system GMM for OECD countries (2010–2021). We test the hypothesis that housing price appreciation affects income distribution differently based on economic development levels and homeownership patterns. The analysis is conducted both for the entire sample and by dividing countries into two groups based on per capita income, Group 1 (16 countries) with below-median per capita GDP and Group 2 (17 countries) with above-median per capita GDP, to account to account for structural differences in housing markets, financial systems, and wealth accumulation mechanisms. The findings show that rising housing prices help reduce income inequality, especially in countries that are relatively low-income and where more low-income households own their homes. Specifically, our estimates indicate that a one-point increase in the housing price index leads to a statistically significant ( p < 0.05) 0.21 percentage point reduction in the Gini change rate in lower-income countries. However, in higher-income countries, the effect of housing prices on inequality is statistically insignificant, suggesting that the relationship between housing markets and income inequality varies across different economic contexts. This insignificance likely stems from countervailing forces: while housing appreciation increases wealth for homeowners, higher housing costs may disproportionately burden lower-income households through rental markets in these economies. The findings highlight the importance of country-specific housing programs that consider homeownership patterns and financial market access in tackling inequality, along with comprehensive public social policies. Our study has implications for policymakers seeking to address inequality through housing market interventions, particularly during the post-2008 recovery period and into the early pandemic phase.

Keywords: housing price index; income inequality; income distribution; sustainable housing; affordable housing; urban sustainability (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:17:y:2025:i:9:p:4024-:d:1646035

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