Since 1970, housing’s relative price, share of expenditure, and “unaffordability” have all grown.
We estimate housing demand parameters using compensated and uncompensated frameworks over
space and time, testing restrictions imposed by demand theory and household mobility. The data
support the hypothesis that housing demand is both income and price inelastic, and that housing
demand has exhibited a secular increase over time. We estimate an ideal cost-of-living index that
demonstrates how the poor are impacted disproportionately in high-rent cities, and how rising rents
amplified increases in real income inequality. Rising rents and inequality both help explain why
housing has become less affordable