Supply constraints, COVID-19, and regional spillovers in Northern Ireland’s rental market

Abstract

Rising private-sector rental inflation has seen over 9% growth annually since 2019. Prevailing market sentiment attributes these pressures to binding local supply constraints amplifying rent responses to demand shocks (Glaeser et al., 2005). However, recent evidence finds that cross-city variation in supply elasticities fails to explain divergent price and quantity growth after income shocks (Louie et al., 2025). Within NI, studies have documented COVID-19’s transient price effects and long-run cointegration (McCord et al., 2022), however none have directly tested whether supply constraints moderate rent-income dynamics or whether spatial spillovers exist. This study examines whether local housing supply constraints amplify rent inflation and housing completion growth in response to income shocks during 2019–2024. Extending a standard demand-supply framework, we estimate an OLS panel with supply-constraint interactions, an error-correction model to extricate short-run from long-run causality between incomes and rents, and spatial propagation models to trace rent-shock spillovers across neighbouring regions.