Out-of-Town Home Buyers and City Welfare

Many cities have attracted a flurry of out-of-town (OOT) home buyers. Such capital inflows affect house prices, rents, construction, labor income, wealth, and ultimately welfare. We develop an equilibrium model to quantify the welfare effects of OOT home buyers for the typical U.S. metropolitan area. When OOT investors buy 10% of the housing in the city center and 5% in the suburbs, welfare among residents falls by 0.61% in consumption-equivalent units. House prices and rents rise substantially, resulting in welfare gains for owners and losses for renters. Policies that tax OOT buyers or mandate renting out vacant property mitigate welfare losses.

Automated summary

The influx of out-of-town home buyers in many cities affects house prices, rents, and ultimately welfare. Policies such as taxing OOT buyers or mandating renting out vacant property can mitigate welfare losses for residents, as OOT investors buying properties in city centers and suburbs can lead to welfare gains for owners but losses for renters.