Inequality in U.S. housing prices and rents both declined in the mid-20th century, even as home-ownership rates rose. Subsequently, housing-price inequality has risen to pre-War levels, while rent inequality has risen less. Combining both measures, we see inequality in housing consumption equivalents mirroring patterns in income across both space and time, according to an income elasticity of housing demand just below one. These patterns occur mainly within cities, and are not explained by observed changes in dwelling characteristics or locations. Instead, recent increases in housing inequality are driven most by changes in the relative value of locations, seen especially through land.
We want to thank John Bound, Charles Brown, Gabriel Ehrlich, Enrico Moretti, Matthew Shapiro, Jeff Smith, and Bryan Stuart for valuable comments and suggestions. This research was supported by a grant to Zabek via the Population Studies Center at the University of Michigan (R24 HD041028) and in part through computational resources and services provided by Advanced Research Computing at the University of Michigan, Ann Arbor. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.