Thies Lindenthal (University of Cambridge): "The Housing Affordability Revolution"

This paper provides the first long-term overview of developments in urban housing affordability, quality and inequality, focusing on seven European cities from 1500 to the present. Based on the rental indices developed by EKL (2022), we create new indices of housing quality and inequality, and relate these to changes in wages and population. Before 1900, markets were unregulated and rent prices and wages rose in tandem when cities grew while housing quality and inequality increased. We document a housing affordability revolution between the 1910s and the 1970s when housing affordability and quality improved dramatically while housing consumption inequality declined. We show that part of the short-term affordability improvement in this period was attributable to rent controls. Most of the surge in housing expenditure that did occur over time is due to increasing housing quality rather than rising rent.