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Do new housing units in your backyard raise your rents?
[Estimates of the size and source of price declines due to nearby foreclosures]

Author

Listed:
  • Xiaodi Li
Abstract
There is a growing debate about whether new housing units increase rents for immediately surrounding apartments. Some argue new market-rate development produces a supply effect, which should alleviate the demand pressure on existing housing units and decrease their rents. Others contend that new development will attract high-income households and new amenities, generating an amenity effect and driving up rents. I contribute to this debate by estimating the impact of new high-rises on nearby residential rents, residential property sales prices and restaurant openings in New York City. To address the selection bias that developers are more likely to build new high-rises in fast-appreciating areas, I restrict the sample to residential properties near approved new high-rises and exploit the plausibly exogenous timing of completion conditional upon the timing of approval. I provide event study evidence that within 500 ft, for every 10% increase in the housing stock, rents decrease by 1%; and for every 10% increase in the condo stock, condo sales prices decrease by 0.9%. In addition, I show that new high-rises attract new restaurants, which is consistent with the hypothesis about amenity effects. However, I find that the supply effect dominates the amenity effect, causing net reductions in the rents and sales prices of nearby residential properties.

Suggested Citation

  • Xiaodi Li, 2022. "Do new housing units in your backyard raise your rents? [Estimates of the size and source of price declines due to nearby foreclosures]," Journal of Economic Geography, Oxford University Press, vol. 22(6), pages 1309-1352.
    • Handle: RePEc:oup:jecgeo:v:22:y:2022:i:6:p:1309-1352.
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    File URL: http://hdl.handle.net/10.1093/jeg/lbab034
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    Citations

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    Cited by:

    1. Bratu, Cristina & Harjunen, Oskari & Saarimaa, Tuukka, 2023. "JUE Insight: City-wide effects of new housing supply: Evidence from moving chains," Journal of Urban Economics, Elsevier, vol. 133(C).
    2. Bertacchini, Enrico & Revelli, Federico & Zotti, Roberto, 2023. "Lord, how I want to be in that number! On the blessing of UNESCO World Heritage listing," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202304, University of Turin.
    3. Bertacchini, Enrico & Revelli, Federico & Zotti, Roberto, 2024. "The economic impact of UNESCO World Heritage: Evidence from Italy," Regional Science and Urban Economics, Elsevier, vol. 105(C).
    4. Christina Stacy & Chris Davis & Yonah Slifkin Freemark & Lydia Lo & Graham MacDonald & Vivian Zheng & Rolf Pendall, 2023. "Land-use reforms and housing costs: Does allowing for increased density lead to greater affordability?," Urban Studies, Urban Studies Journal Limited, vol. 60(14), pages 2919-2940, November.

    More about this item

    Keywords

    housing supply; housing affordability; spillover effect;
    All these keywords.

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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