The impact of new housing supply on the distribution of rents

Mense, Andreas (2025) The impact of new housing supply on the distribution of rents. Journal of Political Economy Macroeconomics. ISSN 2832-9341

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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.

Item Type:	Article
Additional Information:	© 2025 The Author(s)
Divisions:	LSE
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences
Date Deposited:	06 Feb 2025 11:18
Last Modified:	06 Feb 2025 11:18
URI:	http://eprints.lse.ac.uk/id/eprint/127192

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