Supply Shock Versus Demand Shock: The Local Effects of New Housing in Low-Income Areas

Brian Asquith, Evan Mast and Davin Reed

No 20-07, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: We study the local effects of new market-rate housing in low-income areas using microdata on large apartment buildings, rents, and migration. New buildings decrease nearby rents by 5 to 7 percent relative to locations slightly farther away or developed later, and they increase in-migration from low-income areas. Results are driven by a large supply effect—we show that new buildings absorb many high-income households—that overwhelms any offsetting endogenous amenity effect. The latter may be small because most new buildings go into already-changing areas. Contrary to common concerns, new buildings slow local rent increases rather than initiate or accelerate them.

Keywords: Housing supply; housing affordability; gentrification; amenities (search for similar items in EconPapers)
JEL-codes: R21 R23 R31 (search for similar items in EconPapers)
Pages: 68
Date: 2020-02-19
New Economics Papers: this item is included in nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:87487

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DOI: 10.21799/frbp.wp.2020.07

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