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Estimating the elasticity of supply of housing space rather than units

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  • Liu, Yishen

Abstract

Microeconomic theory suggests that consumers do not consume and suppliers do not supply housing units. Housing units are an artifact of the way in which individuals cluster in residential real estate. The most fundamental measure of willingness to pay on the part of consumers and cost of production experienced by producers is interior space. Empirical literature on housing supply in cities has been based on counts of housing units primarily because counts of units are readily available, across time and space. This paper shows how to produce estimates of aggregate square feet of housing. A theory section then demonstrates that measuring supply elasticities using counts of units are biased downward compared to results using interior space. Finally empirical tests confirm the theoretical evidence that housing supply estimates based on counts of units are too small.

Suggested Citation

  • Liu, Yishen, 2018. "Estimating the elasticity of supply of housing space rather than units," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 1-10.
    • Handle: RePEc:eee:regeco:v:68:y:2018:i:c:p:1-10
    DOI: 10.1016/j.regsciurbeco.2017.10.013
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    Cited by:

    1. Fesselmeyer, Eric & Seah, Kiat Ying Sky, 2018. "The effect of localized density on housing prices in Singapore," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 304-315.
    2. Larson, William & Yezer, Anthony & Zhao, Weihua, 2022. "Urban planning policies and the cost of living in large cities," Regional Science and Urban Economics, Elsevier, vol. 96(C).
    3. Anthony Yezer & William Larson & Weihua Zhao, 2018. "An Examination of the Link between Urban Planning Policies and the High Cost of Housing and Labor," Working Papers 2018-6, The George Washington University, Institute for International Economic Policy.

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    More about this item

    Keywords

    Housing supply elasticity; Housing space; Spatial equilibrium;
    All these keywords.

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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