Report: Location-Based Rent Premiums Are a Good Investment

If the rent is too damn high, it might still be a good investment.

2 minute read

August 30, 2018, 1:00 PM PDT

By James Brasuell @CasualBrasuell


Manhattan, New York City

dnaveh / Shutterstock

A working paper published recently by the National Bureau of Economic Research offers reason for optimism for renters paying high costs to live in desirable neighborhoods: that rent premium is a good investment that pays back in job opportunities, quality education, and cultural enmities.

Laura Bliss shares the news of the paper, authored by Esteban Rossi-Hansberg and Adrien Bilal, a Princeton University economics professor and Ph.D student, respectively. Here's how Bliss explains the big conclusion for renters who might feel disheartened by the cost of living in high-demand neighborhoods:

So, when you choose to move to a pricier and amenity-laden city, you’re transferring resources into the future—i.e., saving!—by establishing yourself near opportunities for higher pay and human capital, Rossi-Hansberg and Bilal argue. On the flipside, when you relocate to a community with a lower cost of living but fewer economic advantages, you’re pulling resources into the present that you might have gained in the future—i.e., borrowing.

Bliss notes that the study comes with the caveats that not everyone can afford to make those kinds of investment into the future.

"But, Rossi-Hansberg and Bilal hypothesize, if your location is an asset, it can also be 'sold' when you need the income," explains Bliss. "In other words, if you’ve just lost your job or been hit with a big bill, you can cash in your location by moving to a less-premium one." As detailed in the article, the paper presents evidence that individuals at lower income levels were more likely to "trade in" locations.

Wednesday, August 1, 2018 in CityLab

View of Mount Hood at golden hour with Happy Valley, Oregon homes in foreground.

Clackamas County Votes to Allow ADUs, Residential RVs

County officials hope the zoning changes will help boost the housing supply in the region.

June 18, 2024 - Mountain Times

Single-family homes in a suburban neighborhood in Florida.

New Florida Law Curbs HOA Power

The legislation seeks to cut down on ‘absurd’ citations for low-level violations.

June 16, 2024 - The Guardian

Aerial view of intersection in New York City with yellow cabs and zebra crosswalks.

Planners’ Complicity in Excessive Traffic Deaths

Professor Wes Marshall’s provocatively-titled new book, "Killed by a Traffic Engineer," has stimulated fierce debates. Are his criticisms justified? Let’s examine the degree that traffic engineers contribute to avoidable traffic deaths.

June 13, 2024 - Todd Litman

Two-story homes on residential street in Surrey, British Columbia, Canada.

British Columbia Cracks Down on Short-Term Rentals

Provincial leaders say the new rules could open up as many as 19,000 units for long-term rental.

June 20 - CTV

Small backyard cottage with gabled roof in San Diego, California.

San Diego Sees Continued Growth in ADU Permits

Recent changes to regulations have made it easier and more affordable for homeowners to build ‘granny flats,’ and San Diego’s housing stock is benefiting.

June 20 - Axios San Diego

Close-up of top of California state capitol dome with U.S. and California flags flying and blue sky in background.

California is Updating its Climate Adaptation Strategy

The 2024 draft plan outlines the state's key climate resilience priorities, includes specific and measurable actions, and serves as a framework for collective efforts across sectors and regions in California.

June 20 - California Natural Resources Agency

Urban Design for Planners 1: Software Tools

This six-course series explores essential urban design concepts using open source software and equips planners with the tools they need to participate fully in the urban design process.

Planning for Universal Design

Learn the tools for implementing Universal Design in planning regulations.