Full Citation

Title: Income stagnation and housing affordability in the United States

Citation Type: Journal Article

Publication Year: 2022

ISBN:

ISSN: 14701162

DOI: 10.1080/00346764.2020.1762914

NSFID:

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Abstract: Between 1980 and 2016 the share of households in the bottom quintile of the income distribution that owned their own home declined by 10 percentage points. For the same households, the share of monthly income spent on rent increased from 28% in 1960 to over 42% in 2016. To asses the extent to which income stagnation is responsible for the decline in affordability, I use Census microdata to construct counterfactual simulations that capture the evolution of housing market trends under alternative assumptions about the distribution of income. Income stagnation explains nearly the entire decline in affordability for the bottom quintile. Housing market frictions that cause the price of housing to deviate from marginal cost matter more to households further up the income distribution. Using Atkinson-type welfare-based inequality measures, I find that the counterfactual distribution of income – with inequality held constant – results in greater welfare for nearly all possible levels of inequality aversion.

Url: https://doi.org/10.1080/00346764.2020.1762914

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Authors: Petach, Luke

Periodical (Full): Review of Social Economy

Issue: 3

Volume: 80

Pages: 359-386

Data Collections: IPUMS USA

Topics: Housing and Segregation

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