(Why) Are Housing Costs Rising?

29 Pages Posted: 9 Feb 2019 Last revised: 12 Feb 2019

See all articles by Christos Makridis

Christos Makridis

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: January 28, 2019

Abstract

Housing costs, relative to household incomes, have grown by 22 percent between 1980 and 2017. While the standard view among economists is that these costs reflect spatial differences in housing and zoning regulation, others have more recently argued that they reflect increasing labor costs. This paper shows that labor costs cannot explain the rise in housing costs. In fact, housing costs relative to income have grown more in larger counties where labor costs have decreased. Moreover, the areas with the greatest increases in housing costs relative to income are also the areas with the most restrictive housing regulation.

Keywords: housing affordability, labor costs, regulation, wages

JEL Classification: J31, R14, R21, R31

Suggested Citation

Makridis, Christos, (Why) Are Housing Costs Rising? (January 28, 2019). Available at SSRN: https://ssrn.com/abstract=3318763 or http://dx.doi.org/10.2139/ssrn.3318763

Christos Makridis (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States

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