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  5. Dynamics of the Long Term Housing Yield: Evidence from Natural Experiments

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Dynamics of the Long Term Housing Yield: Evidence from Natural Experiments

  • Verónica Bäcker-Peral
  • Jonathon Hazell
  • Atif Mian
American Economic Review (Forthcoming)

Abstract

Each month, a fraction of UK property leases are extended by 90 years or more. We construct a new dataset using thousands of these natural experiments since 2000, and estimate the expected long-term housing yield, y*. After remaining steady at around 5%, y* starts to decline when the Great Recession hits, and reaches a low of 2.7% in 2024. The decline is steeper in inelastic markets, while y* remains higher in regions more exposed to long-run climate risk. Our estimate of y* is updated in real time using public data.

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