Highlights
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The size of very large houses dramatically increased since 1980, leading to a “McMansion effect.”
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Homeowners’ satisfaction drops with nearby McMansions, but not neighborhood satisfaction.
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In response to the “McMansion effect”, homeowners enlarge homes and incur more debt.
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Isolated McMansions or those built before move-in don’t affect satisfaction or behavior.
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Zoning laws limiting maximum house sizes could enhance welfare by reducing pressure to upscale homes.
Here’s a higher def version of that same picture.