Dynamics of the Long-Term Housing Yield: Evidence from Natural Experiments
Verónica Bäcker-Peral, Jonathon Hazell, Atif Mian
American Economic Review · 2026 · Volume 116 · Issue 3
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.
Keywords
Business Fluctuations, Cycles, Asset Pricing, Trading Volume, Bond Interest Rates, Climate, Natural Disasters and Their Management, Global Warming, Housing Supply and Markets, Production Analysis and Firm Location: Government Policy
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