Hugo Reis
Pedro Carneiro
Raul Santaeulalia-Llopis
Diego Restuccia
Chaoran Chen
Brad J. Hershbein
Claudia Macaluso
Chen Yeh
Xuan Tam
Xin Tang
Marina M. Tavares
Adrian Peralta-Alva
Carlos Carillo-Tudela
Felix Koenig
Joze Sambt
Ronald Lee
James Sefton
David McCarthy
Bledi Taska
Carter Braxton
Alp Simsek
Plamen T. Nenov
Gabriel Chodorow-Reich
Virgiliu Midrigan
Corina Boar
Sauro Mocetti
Guglielmo Barone
Steven J. Davis
Nicholas Bloom
José María Barrero
Thomas Sampson
Adrien Matray
Natalie Bau
Darryl Koehler
Laurence J. Kotlikoff
Alan J. Auerbach
Irina Popova
Alexander Ludwig
Dirk Krueger
Nicola Fuchs-Schündeln
Taylor Jaworski
Walker Hanlon
Ludo Visschers
Carlos Carillo-Tudela
Henrik Kleven
Kristian Jakobsen
Katrine Marie Jakobsen
Alessandro Guarnieri
Tanguy van Ypersele
Fabien Petit
Cecilia García-Peñalosa
Yonatan Berman
Nina Weber
Julian Limberg
David Hope
Pedro Tremacoldi-Rossi
Tatiana Mocanu
Marco Ranaldi
Silvia Vannutelli
Raymond Fisman
John Voorheis
Reed Walker
Janet Currie
Roel Dom
Marcos Vera-Hernández
Emla Fitzsimons
José V. Rodríguez Mora
Tomasa Rodrigo
Álvaro Ortiz
Stephen Hansen
Vasco Carvalho
Gergely Buda
Gabriel Zucman
Anders Jensen
Matthew Fisher-Post
José-Alberto Guerra
Myra Mohnen
Christopher Timmins
Ignacio Sarmiento-Barbieri
Peter Christensen
Linda Wu
Gaurav Khatri
Julián Costas-Fernández
Eleonora Patacchini
Jorgen Harris
Marco Battaglini
Ricardo Fernholz
Alberto Bisin
Jess Benhabib
Cian Ruane
Pete Klenow
Mark Bils
Peter Hull
Will Dobbie
David Arnold
Eric Zwick
Owen Zidar
Matt Smith
Ansgar Walther
Tarun Ramadorai

The impact of international students on housing markets

What is this research about and why did you do it?

The number of international students in American universities more than doubled in the last decade. Much of this increasing reliance on foreign enrollment, particularly by state universities, represents a response by higher education institutions to funding shortfalls. These students disproportionately attend colleges in small urban economies, where local housing markets largely depend on student demand. International students spend home country savings when consuming local goods and services, plausibly representing countercyclical income shocks to local economies. This study estimates the impact of international students on home prices, rents, and residential construction.

How did you answer this question?

We construct a comprehensive sample of American college towns hand-collecting and matching economic and higher education data from dozens of public, private, and administrative sources. College towns combine less than 4% of the country’s population, albeit concentrate one third of all international and total college enrollment. We then estimate the causal effects of foreign students on local housing markets by employing two instruments which address concerns related to the potential endogeneity of student flows.

What did you find?

We find that international students sustained residential investment, raising prices, rents, and housing density. Our estimates indicate that international student inflows increased average home equity by $4,000 relative to the housing boom peak of 06/07, accounting for 40% of the price growth in college towns during the housing slump and subsequent recovery years. We also find that foreign inflows increased rents and stimulated local housing development, leading to the replacement of single-family homes by large apartment buildings near campus.

This figure compares the variation in house prices from 2000 to 2016 in American college towns, college towns with a high share of international students and nationwide. We normalize the 2006 house price peak to 100, so that values are always relative to the year immediately before the bust. For example, prices in the U.S. were 5% lower in 2016 than the 2006-level, while prices in internationalised college towns were 22% lower in 2000 com-pared to the base year. Internationalised college towns are those with at least 5% of students being non-US residents. House prices are the annual HPI from the Federal Housing Finance Agency (FHFA). The index displayed for (internationalised) college towns is the average annual index of all census tracts within a city, averaged over all towns in the sample. There are 241 college towns and 117 internationalised locations reported. The US index is the standard FHFA HPI for the US (all transactions). More details regarding sample and variable construction in the paper.

What implications does this have for the research on wealth concentration or economic inequality?

Larger international student inflows have provided the average local homeowner with $4,000 in home equity increase relative to the housing boom peak, but also raised the local cost of living. Most college towns rate among the most affordable places to attend high quality postsecondary institutions, especially for in-state students who pay discounted tuition. Higher cost of attendance associated with more expensive housing impacts both current and future students, adding to the debate about college affordability.

What are the next steps in your agenda?

Even though they have no direct control over off-campus housing and food expenditure, US colleges are in charge of estimating cost-of-living allowances which determine the amount of aid students may use to cover expenses while enrolled. Understanding the impact of cost of living on students of different socio-economic backgrounds is the next step in this research agenda.

Citation and related resources

This paper can be cited as follows: Mocanu, T., and Tremacoldi-Rossi, P. 2023. 'The impact of international students on housing markets.' Canadian Journal of Economics 56(2), pp. 647-675.

About the authors

Tatiana Mocanu
Pedro Tremacoldi-Rossi

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