Abstract
This paper focuses on the question of wage compensation for housing costs. When housing costs rise with city size, wages should do the same for this gap to be sustainable. Yet, the relationship is not so simple, and may vary across skills. The objective is thus to provide a robust measure of the relative compensation for housing costs between skill levels across cities, and its evolution over 2012-2020, in France. A specific method is proposed to build a composite housing cost index comprising the three segments of the French housing market. Recent developments in the urban wage premia literature are also used to build local skill wage indexes. The results outline two distinct periods: (i) a first 2012-2015 period in which both skill levels receive similar compensation; (ii) a second period, from 2016 onward, in which housing costs rise and high-skilled are more compensated. This study thus contributes to a better understanding of the affordable housing issue in France by shedding light on a specific dimension: the unequal compensation for housing costs across skill levels.