2021/07/20 by Xiaodi Li · 1 citation
Economics, Econometrics and Finance · Business, Management and Accounting · #Housing Market and Economics #Financial Literacy, Pension, Retirement Analysis #Economic and Environmental Valuation #Amenity #Economic rent #Stock (firearms) #Economics #Business #Labour economics #Market economy #Finance #Geography
paper · doi:10.1093/jeg/lbab034
openalex publication_date 2021/07/20 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/30
Abstract There is a growing debate about whether new housing units increase rents for immediately surrounding apartments. Some argue new market-rate development produces a supply effect, which should alleviate the demand pressure on existing housing units and decrease their rents. Others contend that new development will attract high-income households and new amenities, generating an amenity effect and driving up rents. I contribute to this debate by estimating the impact of new high-rises on nearby residential rents, residential property sales prices and restaurant openings in New York City. To address the selection bias that developers are more likely to build new high-rises in fast-appreciating areas, I restrict the sample to residential properties near approved new high-rises and exploit the plausibly exogenous timing of completion conditional upon the timing of approval. I provide event study evidence that within 500 ft, for every 10% increase in the housing stock, rents decrease by 1%; and for every 10% increase in the condo stock, condo sales prices decrease by 0.9%. In addition, I show that new high-rises attract new restaurants, which is consistent with the hypothesis about amenity effects. However, I find that the supply effect dominates the amenity effect, causing net reductions in the rents and sales prices of nearby residential properties.