Innovation and Entrepreneurship in Housing

Edward Kung

Chapter in forthcoming NBER book The Role of Innovation and Entrepreneurship in Economic Growth, Aaron Chatterji, Josh Lerner, Scott Stern, and Michael J. Andrews, editors
Conference held January 7-8, 2020
Forthcoming from University of Chicago Press

In this chapter, I discuss innovation and entrepreneurship in residential real estate and construction (i.e. housing). Based on R&D and patent statistics, housing does not appear to be a very innovative sector. But in the last two decades, there has been a significant increase in the amount of investment going to real estate technology companies. I discuss the companies and technologies which have drawn the most attention from investors. I then review the literature on two major innovation trends in housing: the growth of the internet as a tool for housing search, and the development of home-sharing platforms which allow homeowners to use their homes as short-term rentals. These innovations have likely increased the efficiency of housing markets, leading to higher quality matches between buyers and sellers, and more efficient utilization of space. In comparison to real estate, there appears to have been less recent innovation in construction. In many areas, residential construction is artificially constrained by local land use policies, and estimates from the literature suggest that relaxing these constraints could increase economic growth significantly. Finally, I discuss anti-competitive practices in real estate which may hinder entrepreneurship and the adoption of new innovations.

Supplementary materials for this chapter:

• Data appendix

Acknowledgments

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