The Influence of Public Service Expenditures on Housing Values and Rents: An Interurban Approach

Abstract

Although a wealth of research within the field of urban and regional economics focuses on intraurban variation in housing prices and rents, comparatively less research has been done on their variation at the interurban level – especially with respect to public services. This research attempts to fill this gap in the literature through the investigation of four questions: Do public service expenditures help to explain interurban variation in housing prices and rents? What types of spending make the most difference? How does their effect on housing values compare to their effect on rents? And do these effects change through time? Using an econometric analysis of housing prices and rents in a national data set of metropolitan counties, this research provides substantial evidence linking public goods and services to the place-to-place variations in the cost of living – suggesting that public policy may be used to directly influence the relative attractiveness of regions.