The dynamics of spatial inequality in UK housing wealth

This paper investigates the dynamics of spatial inequality in gross housing wealth in the UK. Our results challenge recent research findings in the UK that suggest inexorable rises in housing wealth inequality. We argue that such findings are illusory, arising in part from the use of final period price levels to categorize areas into low and high house price locations. We use Monte Carlo simulations to illustrate the bias that final period categorization introduces and we then estimate how gross housing wealth inequality changes over time using a battery of measures. All our results indicate that there is evidence of cycles in housing wealth inequality but no evidence of an upward trend. Most surprisingly, the cycles in inequality are found to be of very large amplitude and this may have important effects on consumption, work incentives and business formation. We also find that the entire distribution of house values has shifted which is likely to imply a growing gulf in housing wealth between owners and renters over the period considered.