What's the Deal with Brokers?: Evidence from Regulatory Change in the U.S. Real Estate Market

Abstract

I study the downstream effects of intermediary organization in residential real estate, where brokers constitute 20% of the workforce but intermediate every transaction. Exploiting a Texas reform that raised broker licensing requirements with one year of advance notice, I document a 73% anticipatory surge in broker entry that expanded the medium-term stock by 8%. The reform did not improve the quality of intermediation delivered to consumers. However, the expanded broker pool attracts additional salespeople but generates no gains in transaction volume, prices, or liquidity, consistent with rent extraction over a fixed transaction flow rather than improved allocative efficiency.

Keywords: real estate, occupational licensing, housing search, urban, labor, broker, intermediary, market concentration, entry barrier

JEL Classification: R02, R03, J08, J44, J51, L85