Are homebuyers willing to pay a premium for a diverse neighborhood? – TNT

New research from the National Institute of Economic and Social Research (NIESR) has found that many homebuyers in Northern Ireland pay a premium to live in a multicultural neighbourhood.

The research, called ‘Housing Divides – Cultural Diversity, Property Values, and the Uneven Geography of Opportunity in Northern Ireland’, was conducted by Rachel Cho, Hisham Farag, Christoph Görtz, Danny McGowan, Huyen Nguyen and Max Schröder.

Their paper says: “This finding is significant, not just because it reveals something about peoples’ preferences for their living environments, but because house prices can profoundly influence wealth inequality, community integration, and social mobility.”

As house prices rise, the homeowners become wealthier, potentially broadening the gap between property owners and renters. The researchers believe that understanding what drives house prices, including the cultural composition of neighbourhoods, “can help policymakers shape fairer and more inclusive housing markets”.

Whilst historically people have often preferred living near others like themselves, a phenomenon, more culturally diverse areas with different cultural attitudes and norms can lose social cohesion and cooperation, and even, in rare cases, cause competition and conflict. Such consequences might reduce the desirability of these more diverse neighbourhoods, exerting a negative effect on house prices.

Alternatively, diversity and the exchanges of ideas and viewpoints can create culturally mixed environments that would raise the attractiveness of diverse neighbourhoods and push up house prices.

Religious divides in Northern Ireland can be traced back to the early 1600s and the creation of estates almost exclusively for one faith, and others created in what the report describes as “haphazard, quasi-random fashion”, leading to some areas becoming more mixed.

The researchers use data on contemporary house sales (2021-2025) in conjunction with statistical techniques to isolate the causal effect of diversity on house prices. They discover a clear “diversity premium”: on average, properties in culturally diverse neighbourhoods sell for nearly 10% more than those in culturally segregated areas.

One key reason the research found is that these areas attract a broader spectrum of potential buyers where homes become easier to sell and less come with less of the risk associated with property investment. Multicultural neighbourhoods often boast better schools, public services, and opportunities for social interaction.

Studies have also found that that vendors are often willing to give a considerable discount to potential buyers from a similar ethnic or cultural background. “In diverse neighbourhoods,” the new research says, “where more inter-cultural, transactions occur, higher prices might therefore reflect discrimination rather than true desirability.”

By investigating the title deeds and ownership history of many properties in Northern Ireland, the researchers established that, as per their hypothesis, that there are more inter-cultural transactions in more diverse neighbourhoods, making them more attractive to more house-hunters, supporting the idea that these areas attract more buyers. They found no evidence of a discriminatory price premium in inter-cultural transactions.

The report says: “These additional findings suggest that the diversity premium broadly reflects the increased willingness of both Catholic and Protestant buyers to purchase properties in more diverse neighbourhoods rather than any form of price discrimination.

“Rising house-price differentials between mixed and segregated areas might mean that those who own properties in less diverse neighbourhoods become increasingly shut out of vibrant, diverse neighbourhoods. This might be particularly problematic since diverse areas are associated with better access to opportunities for learning, working and investing. In the long run this might hurt social mobility and create a sense of alienation amongst those that are priced out of the opportunities that diversity can bring, entrenching the divisions society has worked so hard to overcome.”

On a positive note, the findings suggest that the attractiveness of multicultural areas might be a powerful reason to regenerate neighbourhoods, invest more in schools, transport and public services, and foster social integration.

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