Most of America’s largest cities in 1950 declined in population in the intervening period. In 1990, nearly 60 percent of all owner-occupied single-unit residences in Midwest cen-tral cities were valued at less than the cost of construction. Nevertheless, these declining cities appear to persist because of the durability of housing. We present a durable housing model that explains a number of facts about urban dynamics. Housing durability explains why city growth rates are skewed, and why cities grow more quickly than they decline. Housing durability can explain the striking persistence of city growth rates among declin-ing cities. Housing durability explains why positive shocks to cities appear to increase pop-ulation more than prices and why negative shocks appear to reduce price more than pop-ulation. Finally, and most important, durable housing may explain why declining cities appear to attract individuals with low levels of human capital.
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Paper provided by Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania in its series Zell/Lurie Center Working Papers with number
417.