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The Impact of Supply Constraints on House Prices in England

Author

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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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    References listed on IDEAS

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    1. Aura, Saku & Davidoff, Thomas, 2008. "Supply constraints and housing prices," Economics Letters, Elsevier, vol. 99(2), pages 275-277, May.
    2. Paul C. Cheshire & Christian A. L. Hilber, 2008. "Office Space Supply Restrictions in Britain: The Political Economy of Market Revenge," Economic Journal, Royal Economic Society, vol. 118(529), pages 185-221, June.
    3. Hilber, Christian A.L., 2005. "Neighborhood externality risk and the homeownership status of properties," Journal of Urban Economics, Elsevier, vol. 57(2), pages 213-241, March.
    4. Gavin Cameron & John Muellbauer & Anthony Murphy, 2006. "Was There A British House Price Bubble? Evidence From A Regional Panel," ERES eres2006_150, European Real Estate Society (ERES).
    5. Hilber, Christian A.L., 2010. "New housing supply and the dilution of social capital," Journal of Urban Economics, Elsevier, vol. 67(3), pages 419-437, May.
    6. G Bramley, 1998. "Measuring Planning: Indicators of Planning Restraint and its Impact on Housing Land Supply," Environment and Planning B, , vol. 25(1), pages 31-57, February.
    7. Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2011. "Winners and Losers in Housing Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(2‐3), pages 255-296, March.
    8. Muellbauer, John & Murphy, Anthony, 1997. "Booms and Busts in the UK Housing Market," Economic Journal, Royal Economic Society, vol. 107(445), pages 1701-1727, November.
    9. Christian A. L. Hilber & Christopher J. Mayer, 2004. "Why Do Households Without Children Support Local Public Schools?," NBER Working Papers 10804, National Bureau of Economic Research, Inc.
    10. John M. Quigley & Steven Raphael, 2005. "Regulation and the High Cost of Housing in California," American Economic Review, American Economic Association, vol. 95(2), pages 323-328, May.
    11. Hilber, Christian A.L. & Robert-Nicoud, Frédéric, 2013. "On the origins of land use regulations: Theory and evidence from US metro areas," Journal of Urban Economics, Elsevier, vol. 75(C), pages 29-43.
    12. Raffaella Sadun, 2015. "Does Planning Regulation Protect Independent Retailers?," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 983-1001, December.
    13. Tracy M. Turner, 2003. "Does Investment Risk Affect the Housing Decisions of Families?," Economic Inquiry, Western Economic Association International, vol. 41(4), pages 675-691, October.
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    Citations

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    Cited by:

    1. O’Brien, Philip & Lord, Alex & Dembski, Sebastian, 2020. "How do planners manage risk in alternative land development models? An institutional analysis of land development in the Netherlands," Land Use Policy, Elsevier, vol. 91(C).
    2. Nicholas Crafts, 2013. "Returning to Growth: Policy Lessons from History," Fiscal Studies, Institute for Fiscal Studies, vol. 34(2), pages 255-282, June.
    3. Philippe Bracke & Christian Hilber & Olmo Silva, 2014. "Homeownership and Entrepreneurship: The Role of Mortgage Debt and Commitment," CESifo Working Paper Series 5048, CESifo.
    4. ., 2014. "Planning for a housing crisis: or the alchemy by which we turn houses into gold," Chapters, in: Urban Economics and Urban Policy, chapter 4, pages 79-103, Edward Elgar Publishing.
    5. repec:ehl:lserod:50482 is not listed on IDEAS
    6. Faggio, Giulia & Overman, Henry, 2014. "The effect of public sector employment on local labour markets," Journal of Urban Economics, Elsevier, vol. 79(C), pages 91-107.
    7. Wouter Vermeulen & Maarten Allers, 2013. "Fiscal Equalization and Capitalization: Evidence from a Policy Reform," CPB Discussion Paper 245.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Wouter Vermeulen & Maarten Allers, 2013. "Fiscal Equalization and Capitalization: Evidence from a Policy Reform," CPB Discussion Paper 245, CPB Netherlands Bureau for Economic Policy Analysis.
    9. Cheshire, Paul & Dericks, Gerard, 2014. "'Iconic design' as deadweight loss: rent acquisition by design in the constrained London office market," LSE Research Online Documents on Economics 58457, London School of Economics and Political Science, LSE Library.
    10. Bimonte, Salvatore & Stabile, Arsenio, 2015. "Local taxation and urban development. Testing for the side-effects of the Italian property tax," Ecological Economics, Elsevier, vol. 120(C), pages 100-107.
    11. Salvatore Bimonte & Arsenio Stabile, 2019. "The Effect of Growth and Corruption on Soil Sealing in Italy: A Regional Environmental Kuznets Curve Analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(4), pages 1497-1518, December.
    12. ., 2014. "Planning and economic performance," Chapters, in: Urban Economics and Urban Policy, chapter 5, pages 104-126, Edward Elgar Publishing.

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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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