New research suggests that housing inequality may be the biggest contributor to our country's economic inequality, reports CityLab's Richard Florida. Research by Matthew Rognlie found that how much more expensive some houses are than others is the key factor in rising wealth. Florida explains:
Rognlie’s research documented that the share of wealth or capital income derived from housing has grown significantly since around 1950, and substantially more than for other forms of capital.
More recent research on this topic by urban economists David Albouy and Mike Zabek documents the surge in housing inequality in the United States. Their study, published as a National Bureau of Economic Research working paper, charts the rise in housing inequality across the U.S. from the onset of the Great Depression in 1930 through the great suburban boom of the 1950s, 1960s, and 1970s, to the more recent back-to-the-city movement, the 2008 economic crash, and the subsequent recovery, up to 2012. They use data from the U.S. Census on both homeowners and renters.
Over the period studied, the share of owner-occupied housing rose from less than half (45 percent) to nearly two-thirds (65 percent), although it has leveled off somewhat since then. The median cost of a home tripled in real dollar terms, according to their analysis. Housing now represents a huge share of America’s total consumption, comprising roughly 40 percent of the U.S. total capital stock, and two-thirds of the wealth held by the middle class.Read More