Dynamics of the Long-Term Housing Yield: Evidence from Natural Experiments

Each month, a fraction of UK property leases are extended by 90 years or more. We construct a new dataset using thousands of these natural experiments since 2000 and estimate the expected long-term housing yield, y^∗. After remaining steady at around 5 percent, y^∗ starts to decline when the Great Recession hits and reaches a low of 2.7 percent in 2024. The decline is steeper in inelastic markets, while y^∗ remains higher in regions more exposed to long-run climate risk. Our estimate of y^∗ is updated in real time using public data. (JEL E32, G12, Q54, R31, R38).