A World Divided: Refugee Centers, House Prices, and Household Preferences

Abstract

The number of refugees around the world has increased substantially in the last decade. To cope with refugee flows, many countries have built refugee centers (RCs) for refugees to await the outcome of their asylum procedure. The opening of such centers often leads to considerable opposition from the local population. Using detailed housing transactions data from the Netherlands over the period 1990-2015, we examine locals' attitudes towards immigration by investigating households' willingness to pay (WTP) to avoid living near RCs. Comparing the price developments of opened RCs and those that are planned, we show that the opening of an RC decreases house prices within 2km by 3-6%. Using micro-data on home buyers' characteristics and employing a non-parametric hedonic pricing method, we identify households' individual preferences. We show that attitudes of higher income households towards RCs tend to be more negative, while those of foreign-born households are more positive. The WTP is also more negative for larger RCs. These results imply that when opening RCs, it is advisable to keep them relatively small and locate them in more ethnically diverse areas.