Modeling urban housing market dynamics: can the socio-spatial segregation preserve some social diversity?

TL;DR

This paper presents a model of urban housing markets showing how socio-spatial segregation occurs due to social influences, yet some social diversity persists, aligning with observed patterns in Paris.

Contribution

It introduces a novel model incorporating social influence into housing transaction dynamics and analytically characterizes the resulting income distribution and segregation.

Findings

Segregation occurs when social influence exceeds a threshold.

Some social diversity remains at most locations despite segregation.

Model reproduces key features of Paris housing market data.

Abstract

Addressing issues of social diversity, we introduce a model of housing transactions between agents who are heterogeneous in their willingness to pay. A key assumption is that agents' preferences for a location depend on both an intrinsic attractiveness and on the social characteristics of the neighborhood. The stationary space distribution of income is analytically and numerically characterized. The main results are that socio-spatial segregation occurs if -- and only if -- the social influence is strong enough, but even so, some social diversity is preserved at most locations. Comparison with data on the Paris housing market shows that the results reproduce general trends of price distribution and spatial income segregation.