Urban Housing Markets and Sustainability Risk: Empirical Evidence From South African Cities

ABSTRACT Despite the global shift toward sustainability and rising expectations for socially and environmentally responsible housing, evidence from South Africa's urban markets remains limited and underexplored. This study examines how sustainability‐related vulnerabilities shape downside housing risk across 60 cities between 2002 and 2021. We construct a sustainability risk index using an entropy‐weighted spatial framework that combines social vulnerability, environmental pressures, and governance resilience. Downside risk is measured using Housing‐at‐risk, capturing severe declines in the lower tail of house price growth. Empirical results from spatial Durbin models reveal strong spatial interdependence between sustainability and housing risks. While Social vulnerability is associated with improved local resilience, sustainability challenges and environmental pressures significantly raise downside risk within cities, and generate spillovers that dampen vulnerabilities in neighboring areas. Therefore, housing risk in South Africa is spatially connected and conditioned by local sustainability conditions; underscoring the need for coordinated urban policies that integrate social inclusion, environmental adaptation, and financial stability.