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Spillover effects from new housing supply

Gonzalez Pampillon, Nicolas (2019) Spillover effects from new housing supply. CEP Discussion Papers (CEPDP1660). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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I estimate spillovers from new housing supply on house prices, crime rates, and household income. To estimate these effects, I use exogenous variation in supply induced by a housing subsidy implemented in middle-income neighborhoods in the city of Montevideo. The program incentivized residential development through tax breaks that led to sizable investments in certain neighborhoods. I exploit the spatial structure of the scheme to identify the externalities and find clear evidence of spillovers from new supply on house prices, with prices increasing between 12 and 17%. Property crime rates only decreased in the short term, while there is evidence of an increase in household income, suggesting that the neighborhood income mix responded to the supply expansion. Increasing supply appears to revitalize neighborhoods, but these effects also reduce housing affordability.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2019 The Author(s)
Divisions: What Works Centre
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
JEL classification: R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R23 - Regional Migration; Regional Labor Markets; Population
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R30 - General
R - Urban, Rural, and Regional Economics > R5 - Regional Government Analysis > R58 - Regional Development Policy
Date Deposited: 11 Mar 2024 11:54
Last Modified: 16 May 2024 12:35

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