This paper examines the welfare costs of rent growth and the prospects for reducing these costs. Using panel data on the near universe of renters in the US 2014-2022, we estimate migration costs between neighborhoods jointly with the demand system for neighborhoods and commuting zones. A structural dynamic model of demand for cities and neighborhoods with endogenous mobility underlies these estimates. Using estimated model parameters, we quantify how migration to substitute cities and neighborhoods has mitigated the welfare cost of rent growth by household type. A reduced-form analysis of the impacts of housing supply shocks on renters’ mobility and rental payments corroborates this model-based decomposition. By exploring the drivers of renters’ mobility in response to policy shocks that influence rental prices, we provide insights for policymakers in creating more sustainable and inclusive cities.
