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Dynamics of the Long-Term Housing Yield: Evidence from Natural Experiments

Author

Listed:
  • Verónica Bäcker-Peral
  • Jonathon Hazell
  • Atif Mian

Abstract

Each month, a fraction of UK property leases are extended by 90 years or more. We construct a new dataset using thousands of these natural experiments since 2000 and estimate the expected long-term housing yield, y*. After remaining steady at around 5 percent, y* starts to decline when the Great Recession hits and reaches a low of 2.7 percent in 2024. The decline is steeper in inelastic markets, while y* remains higher in regions more exposed to long-run climate risk. Our estimate of y* is updated in real time using public data.

Suggested Citation

  • Verónica Bäcker-Peral & Jonathon Hazell & Atif Mian, 2026. "Dynamics of the Long-Term Housing Yield: Evidence from Natural Experiments," American Economic Review, American Economic Association, vol. 116(3), pages 1014-1051, March.
    • Handle: RePEc:aea:aecrev:v:116:y:2026:i:3:p:1014-51
    DOI: 10.1257/aer.20240513
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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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