The impact of new housing supply on the distribution of rents

Andreas Mense

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: I estimate the impact of new housing supply on the local rent distribution, exploiting delays in housing completions caused by weather shocks. A 1% increase in new supply (i) lowers average rents by 0.19%, (ii) effectively reduces rents of lower-quality units, and (iii) disproportionately increases the number of second-hand units available for rent. Moreover, the impact on rents is equally strong in high-demand markets. Employing a quantitative model, I explain these results by second-hand supply: New supply triggers moving chains that free up units in all market segments. The estimate translates into a short-run demand price elasticity of −0.025.

JEL-codes: R31 (search for similar items in EconPapers)
Date: 2025-01-27
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Published in Journal of Political Economy Macroeconomics, 27, January, 2025. ISSN: 2832-9341

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