The impact of employment on housing prices: Detailed evidence from FDI in Ireland

Access to employment is one of the most valuable amenities offered by cities. In urban economics, this is the principal driver of the bid-rent gradient and is a key determinant of housing prices and land values. However, little is known about the causal effect of employment on housing prices, due to the problem of identification. This study presents the first causal estimates of employment changes on housing prices, both sales and rental. It does this by using a purpose-built spatially granular dataset of 1.4 million housing prices and FDI employment, covering Ireland 2007-2013. Identification rests on a combination of rich spatio-temporal variation due to the abundance of FDI in Ireland, a rich set of location controls and an inelastic housing supply in the period covered. The main results show that 1-2 years after 1000 extra jobs have been created, monthly rents in nearby properties will be between 0.5% and 1% higher. The effect on prices is at least 2% but less consistent across specifications. On average, net job creation in export-oriented FDI firms 2009-2013 added roughly €48 million to the stock of wealth of owner occupied real estate and €8 million to the stock of wealth of the rental sector. We also estimate that the aggregate effect of the stock of FDI jobs in 2013 on Irish housing prices is €440 million, or just over 1%.