The McMansion Effect: Top House Size and Positional Externalities in U.S. Suburbs

Abstract

This paper provides direct field-level evidence of positional externalities in the size of neighboring houses. Combining data from the American Housing Survey with a geolocalized data set of three million suburban houses, I show that homeowners exposed to the construction of very large houses in their suburb are less satisfied with their own house, while no such effect is found on neighborhood satisfaction. Positional externalities are conditional on the visual salience of so-called McMansions within suburbs — captured by their proximity to roads — and are stronger among people living in larger houses, consistent with trickle-down effects. I provide further evidence that homeowners experiencing the construction of very large houses in their suburb are more likely to upscale to a larger house, and take up more debt.

Keywords: Housing, Positional Externality, Relative Consumption Hypothesis, Subjective Well-Being, Inequality

JEL Classification: D12, Z13, I31