Urban Pull: The Roles of Amenities and Employment

Abstract

This paper leverages new measurement of neighborhood amenities to demonstrate that housing prices and rents in U.S. cities are determined nearly as much by proximity to amenities as they are by proximity to employment. We develop a revealed preference measure of amenities using navigations data indicating the locations in which people consume leisure. Consumption amenity centers overlap substantially with employment centers but are distinct and have distinct effects on prices. Using the Alonso-Muth-Mills within-city spatial equilibrium framework, we estimate the relative importance of amenities and employment in demand for neighborhoods. The navigations-based amenity measure strongly and positively predicts local and nearby prices with spatial decay. It adds substantial explanatory value relative to observable-venues-based amenity measures as well as to several strictly localized amenities, such as school quality or crime. We show that constraining neighborhood amenities to be consumed only by locals, when in fact people may travel within city to consume amenities, misses a key feature of cities and biases estimates of both commute costs and the value of amenities. These improvements in amenity measurement increase the estimated importance of amenities relative to employment in location demand and suggest the potential robustness of cities to changes in employment locations.