Association for Public Policy Analysis & Management

Panel: Housing Affordability, Inequality, and Well-Being

(Housing and Community Development)

Over the past decade and a half, numerous trends have combined to reshape labor and housing markets in cities. Increased college attainment, increasing preferences of college-educated workers for cities, and increasing demand for college-educated workers have all led college-educated households to increasingly locate near job opportunities in central cities. These trends have increased housing demand, pushing up housing prices in many already high cost cities and in many central city neighborhoods. Combined with stagnant wages and incomes for less educated workers, this has contributed to increasing income inequality and a growing housing affordability crisis.

However, the overall effect of these trends for residents of these cities and neighborhoods are not obvious. Increased housing demand should drive up house values and rents, but urban revival could contribute to improved labor market opportunities, greater amenities, and greater socioeconomic integration for less educated individuals.

This panel explores the implications of increasing labor and housing demand in cities for well-being and inequality. It does so using a variety of novel measures of well-being and inequality to provide new insights into how urban revival might be affecting disadvantaged residents.

The first paper, by Choi and Green, compares traditional measures of income inequality with similar measures of inequality that adjust for housing costs. They explore how adjusted inequality evolves in strong and weak housing markets. Their results suggest that incorporating housing costs into inequality calculations substantially changes our characterization of the income distribution.

The second paper, by Aladangady, Albouy, and Zabek, documents trends in housing price and rent inequality over the past 85 years. They find that these trends mirror those in income inequality. They test different explanations of these trends and conclude that recent increases in housing inequality are driven primarily by changes in the relative value of locations.

The third paper, by Ellen, Reed, and Suher, explores how the relatively strong employment and income growth of college-educated individuals in cities is affecting well-being, opportunity, and inequality for less educated individuals in those cities. They merge restricted Census data with administrative data from the Department of Housing and Urban Development to test directly whether these improve outcomes for recipient households.

The fourth paper, by Rodnyansky and Prohofsky, complements the first three by providing a detailed look at how city trends might be affecting the location and neighborhood quality of households within a city. They do this with administrative data on the universe of tax filers in Los Angeles County, which provides their exact location in each year over the past 21 years. Measuring location and mobility with such fine detail will provide new insight from a large, diverse city into the effects of increasing demand on residents.

Together, these papers will provide new measures of inequality and well-being and demonstrate the importance of these measurements to understanding the effects of city trends on low-income individuals.