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The impact of new housing supply on the distribution of rents

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  • Mense, Andreas

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.

Suggested Citation

  • Mense, Andreas, 2025. "The impact of new housing supply on the distribution of rents," LSE Research Online Documents on Economics 127192, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:127192
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    File URL: http://eprints.lse.ac.uk/127192/
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    More about this item

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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