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The Impact of Supply Constraints on House Prices in England

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  • Christian A. L. Hilber
  • Wouter Vermeulen

Abstract

We test the theoretical prediction that house prices respond more strongly to changes in local earnings in places with tight supply constraints using a unique panel dataset of 353 Local Planning Authorities in England between 1974 and 2008. Exploiting exogenous variation from a policy reform, vote shares and historical density to identify the endogenous constraints†measures, we find that: regulatory constraints have a substantive positive impact on the house price†earnings elasticity; the effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas; and uneven topography has a quantitatively less meaningful impact.

Suggested Citation

  • Christian A. L. Hilber & Wouter Vermeulen, 2016. "The Impact of Supply Constraints on House Prices in England," Economic Journal, Royal Economic Society, vol. 126(591), pages 358-405, March.
  • Handle: RePEc:wly:econjl:v:126:y:2016:i:591:p:358-405
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    File URL: https://doi.org/10.1111/ecoj.12213
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    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • 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
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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