A Test for Pricing Power in Urban Housing Markets

Building demand slopes down.
Rental Markets
Monopoly Power
Housing Demand

C. Luke Watson, Oren Ziv


April 1, 2024


The presence of pricing power in housing markets significantly impacts our understanding of the housing supply. It biases estimates of housing production functions, supply elasticities, and the effects of land-use policies as well as the results of quantitative spatial models. We test for the existence of pricing power in the New York City rental market. Using tax policy changes, we conduct complementary difference-in-differences and instrumental variable analyses. An idiosyncratic increase in a single building’s costs leads to a proportional rent increase, holding market-level rents constant.
Our findings support the existence of pricing power and challenge the prevailing perfect competition framework.

BibTeX citation

    Author = {Watson, C. Luke and Ziv, Oren},
    Month = {12},
    Title = {A Test for Pricing Power in Urban Housing Markets},
    Type = {Manuscript},
    Year = {2023}}