Urban Residential Land and Housing Markets

Economics is concerned primarily with the study of markets. Prices established on these markets play a crucial role in the allocation of resources to different uses and in determining the resulting level of the national income. The markets for residential land and for housing are among the quantitatively most important of all urban markets. According to one estimate, about three-fourths of privately developed land is devoted to residential use in urban areas, ¹ and consumers typically spend around one-fifth of their disposable incomes on housing. Most urban problems are related in one way or another to the operation of urban land and housing markets, and many—such as urban decentralization, poor-quality housing, and the residential segregation of Negroes— are more intimately related to them than to any other markets. Despite their importance, however, until lately urban residential land and housing markets have received little attention from professional economists. Because of the insistent claims of other problems, relating to depression, inflation, and economic growth, economists have tended to concentrate on these. With the increasing intensification of urban problems over the past ten or fifteen years, however, economists have devoted more and more attention to the study of urban residential land and housing markets.