Research using historical data from Northern Ireland indicates that house prices are higher in more diverse neighbourhoods. Housing policy should focus on regenerating neighbourhoods, improving public services and fostering social integration.
Would you pay a premium to live in a multicultural neighbourhood? New research from Northern Ireland finds that many homebuyers do exactly that.
This is significant, not just because it reveals something about people’s preferences for their living environments, but also because house prices can profoundly influence wealth inequality, community integration and social mobility.
In the UK, housing typically represents the largest component of household wealth. When house prices rise, homeowners gain more wealth, potentially exacerbating inequalities between property owners and renters.
As a result, understanding what drives house prices, including the cultural composition of neighbourhoods, can help policy-makers to shape fairer and more inclusive housing markets.
Why is neighbourhood diversity important?
The relationship between cultural diversity and house prices is complex. Historically, research suggested that people often prefer living near others like themselves, a phenomenon known as homophily.
In more culturally diverse areas, differences in cultural attitudes and norms can lead to lower levels of social cohesion and cooperation, or even – in rare cases – competition and conflict (Alesina and La Ferrara, 2000, 2005). These factors might reduce the desirability of more diverse neighbourhoods, exerting a negative effect on house prices.
But an alternative perspective suggests that diversity can lead to fruitful exchanges of different viewpoints and ideas, improving the accumulation of knowledge and skills (human capital) and learning in culturally mixed environments (Alesina et al, 2016; Chetty et al, 2016). Such positive spillovers would raise the attractiveness of diverse neighbourhoods and push up house prices.
To investigate these competing theories further, a new study looks closely at Northern Ireland, a part of the UK that has historically experienced deep divisions between Catholic and Protestant communities. This offers an ideal setting in which to investigate the effects of cultural diversity on house prices, which previous research has found difficult to establish (Cho et al, 2025).
The plantation of Ulster: an unintentional experiment in diversity
The roots of Northern Ireland’s contemporary neighbourhoods go back to the early 1600s when British colonisation of Ulster created lasting cultural divisions between a predominantly Catholic native population and Protestant settlers transplanted from England and Scotland.
Due to the difficulty of administering the colonisation of the area from Westminster, many estates were settled in a haphazard, quasi-random fashion, leading to some areas becoming more mixed, while others became almost exclusively Protestant or remained predominantly Catholic.
The fact that we have any quantitative evidence of this process is due to the hard work of Sir William Petty (1623-87), who led the first granular survey of the land and population of Ireland, known as Petty’s or Pender’s census of Ireland, which was completed between 1654 and 1659.
Using the detailed population information contained in the archival census, the new study finds a high degree of persistence in the cultural make-up of different parts of Northern Ireland, the details of which can be seen in Figure 1.
Figure 1: Share of British settlers in the 1659 census of Ireland (left); and share of Protestant population in the 2021 Northern Ireland census (right)
Source: Census of Ireland and Northern Ireland census
Note: Darker shading indicates a higher share.
Areas with a higher share of British settlers in 1659 consistently exhibit a higher share of Protestant inhabitants in the most recent census of Northern Ireland. Despite a gap of nearly 400 years, the events of the colonisation of Ulster still affect the cultural make-up of communities to this day.
This unique historical accident has allowed the researchers to measure how diversity, rather than associated socio-economic factors, affects house prices in the 21st century.
Measuring the diversity premium
Using data on contemporary house sales (2021-25), in conjunction with statistical techniques, enables researchers to isolate the causal effect of diversity on house prices. This indicates a clear ‘diversity premium’: on average, properties in culturally diverse neighbourhoods sell for nearly 10% more than those in culturally segregated areas.
Why might people value multicultural neighbourhoods more highly? One key reason is that these areas attract a broader spectrum of potential buyers.
When a neighbourhood appeals to a broader section of society, homes become easier to sell, reducing the risk associated with property investment. In addition, multicultural neighbourhoods often boast better schools, better public services and greater opportunities for social interaction – all indicators of the positive spillovers of cultural diversity.
A discrimination premium?
A key question related to the diversity premium is to what extent it reflects discrimination and intra-cultural buyer-seller networks. Many studies find that sellers are often willing to give a considerable discount to potential buyers from a similar ethnic or cultural background (Wong, 2013; Agarwal et al, 2019). In diverse neighbourhoods – where more intercultural transactions occur – higher prices might therefore reflect discrimination rather than true desirability.
To investigate this, the researchers turn to property title deeds, with which they can study the ownership history of different houses. By identifying the likely cultural background of the transacting parties, it is possible to analyse if there are significant differences in transactions involving both Catholics and Protestants.
As hypothesised, this analysis shows that there are more intercultural transactions in more diverse neighbourhoods, supporting the idea that these areas attract more buyers from both cultural communities. Further, there is no evidence of a discriminatory price premium in intercultural transactions.
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.
Implications for inequality and economic prosperity
While the diversity premium tells a broadly positive story about the role of cultural diversity and integration in Northern Ireland, these findings have further important implications for economic and social inequality.
If multicultural neighbourhoods command higher house prices, homeowners in these areas gain disproportionately from rising property values, amplifying wealth differences between those who own property in diverse neighbourhoods and those who do not.
Rising differences in house price gaps 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 among those who are priced out of the opportunities that diversity can bring, entrenching the divisions that society has worked so hard to overcome.
But there is also a positive side. The attractiveness of multicultural areas suggests that encouraging diversity could be a powerful policy tool to regenerate neighbourhoods, improve public services and foster social integration.
Targeted investments in promoting diversity – through schools, community projects or urban planning – could help to lift less-desirable neighbourhoods economically and socially, reducing overall inequality and creating sustainable and inclusive economic growth.
Where can I find out more?
- The Down Survey of Ireland: A research project mapping the Cromwellian conquest of Ireland.
- Home ownership and wealth inequality in Great Britain: A UK Data Service data impact blog.
- Understanding Northern Ireland’s ‘Troubles’: A blog post from the Council on Foreign Relations.
Who are experts on this question?
- Rachel Cho, University of Birmingham
- Hisham Farag, University of Birmingham
- Christoph Görtz, University of Augsburg
- Huyen Nguyen, Halle Institute for Economic Research and Friedrich Schiller University Jena
- Danny McGowan, Durham University
- Max Schroeder, Durham University
