Working Paper: CEPR ID: DP16080
Authors: Arpit Gupta; Vrinda Mittal; Jonas Peeters; Stijn van Nieuwerburgh
Abstract: We show that the COVID-19 pandemic brought house price and rent declines in city centers, and price and rent increases away from the center, thereby flattening the bid-rent curve in most U.S. metropolitan areas. Across MSAs, the flattening of the bid-rent curve is larger when working from home is more prevalent, housing markets are more regulated, and supply is less elastic. Housing markets predict an urban revival with urban rent growth exceeding suburban rent growth for the foreseeable future, as working from home recedes.
Keywords: COVID-19; land values; bid-rent function; working from home
JEL Codes: R23; R51; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| COVID-19 pandemic (H12) | decline in house prices and rents in city centers (R31) |
| COVID-19 pandemic (H12) | increase in prices and rents in suburban areas (R21) |
| COVID-19 pandemic (H12) | flattening of the bid-rent curve (R31) |
| flattening of the bid-rent curve (R31) | urban rent growth exceeds suburban rent growth (R11) |
| decrease in elasticity of house prices to distance from city center (R31) | proximity to urban centers becomes less important in determining housing prices (R31) |