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The Impact of Supply Constraints on House Prices in England

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  • Wouter Vermeulen
  • Christian A.L. Hilber

Abstract

We explore the impact of different types of supply constraints on house prices in England by exploiting a unique panel dataset of 353 local planning authorities ranging from 1974 to 2008. Using 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 long-run impact on the house price-earnings elasticity; The effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas; Uneven topography has a quantitatively less meaningful impact; The effects of supply constraints are greater during boom than bust periods.

Suggested Citation

  • Wouter Vermeulen & Christian A.L. Hilber, 2012. "The Impact of Supply Constraints on House Prices in England," CPB Discussion Paper 219, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:219
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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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