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Office space supply restrictions in Britain: the political economy of market revenge

  • Paul Cheshire
  • Christian A.L. Hilber

Office space in Britain is the most expensive in the world and regulatory constraints are the obvious explanation. We estimate the ‘regulatory tax’ for 14 British office locations from 1961 to 2005. These are orders of magnitude greater than estimates for Manhattan condominiums or office space in continental Europe. Exploiting the panel data, we provide strong support for our hypothesis that the regulatory tax varies according to whether an area is controlled by business interests or residents. Our results imply that the cost of the 1990 change converting commercial property taxes from a local to a national basis – transparently removing any fiscal incentive to permit local development – exceeded any plausible rise in local property taxes.

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File URL: http://eprints.lse.ac.uk/3203/
File Function: Open access version.
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 3203.

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Length: 50 pages
Date of creation: 18 Apr 2007
Date of revision:
Handle: RePEc:ehl:lserod:3203
Contact details of provider: Postal: LSE Library Portugal Street London, WC2A 2HD, U.K.
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/

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  1. Bertaud, Alain & Brueckner, Jan K., 2005. "Analyzing building-height restrictions: predicted impacts and welfare costs," Regional Science and Urban Economics, Elsevier, vol. 35(2), pages 109-125, March.
  2. Christopher J. Mayer & C. Tsuriel Somerville, . "Land Use Regulation and New Construction," Zell/Lurie Center Working Papers 331, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
  3. P. C. Cheshire & Stephen Charles Sheppard, 2005. "The introduction of price signals into land use planning decision-making : a proposal," LSE Research Online Documents on Economics 568, London School of Economics and Political Science, LSE Library.
  4. Paul Cheshire & Stephen Sheppard, 1997. "Welfare Economics of Land Use Regulation," Urban/Regional 9702001, EconWPA.
  5. Paul Cheshire & Christian A.L. Hilber, 2008. "Office space supply restrictions in Britain: the political economy of market revenge," LSE Research Online Documents on Economics 4372, London School of Economics and Political Science, LSE Library.
  6. Gyourko, Joseph & Tracy, Joseph, 1991. "The Structure of Local Public Finance and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 774-806, August.
  7. John Muellbauer, 2005. "Property Taxation and the Economy after the Barker Review," Economic Journal, Royal Economic Society, vol. 115(502), pages C99-C117, 03.
  8. Paul Cheshire, 2005. "Unpriced Regulatory Risk and the Competition of Rules: Unconsidered Implications of Land Use Planning," Journal of Property Research, Taylor & Francis Journals, vol. 22(2-3), pages 225-244, October.
  9. Edward L. Glaeser & Joseph Gyourko, 2003. "The impact of building restrictions on housing affordability," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 21-39.
  10. Mayo, Stephen & Sheppard, Stephen, 2001. "Housing Supply and the Effects of Stochastic Development Control," Journal of Housing Economics, Elsevier, vol. 10(2), pages 109-128, June.
  11. Paul Cheshire & Stephen Sheppard, 2004. "The Introduction of Price Signals into Land Use Planning," Urban/Regional 0410002, EconWPA.
  12. J. Phillips & E. Goodstein, 2000. "Growth management and housing prices: the case of Portland, Oregon," Contemporary Economic Policy, Western Economic Association International, vol. 18(3), pages 334-344, 07.
  13. Wheaton, William C & Torto, Raymond G & Evans, Peter, 1997. "The Cyclic Behavior of the Greater London Office Market," The Journal of Real Estate Finance and Economics, Springer, vol. 15(1), pages 77-92, July.
  14. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2006. "Superstar Cities," NBER Working Papers 12355, National Bureau of Economic Research, Inc.
  15. Patric H. Hendershott & Colin M. Lizieri & George A. Matysiak, 1999. "The Workings of the London Office Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(2), pages 365-387.
  16. Song, Yan & Knaap, Gerrit-Jan, 2003. "New urbanism and housing values: a disaggregate assessment," Journal of Urban Economics, Elsevier, vol. 54(2), pages 218-238, September.
  17. Glaeser, Edward L & Gyourko, Joseph & Saks, Raven, 2005. "Why Is Manhattan So Expensive? Regulation and the Rise in Housing Prices," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 331-69, October.
  18. Ihlanfeldt, Keith R. & Shaughnessy, Timothy M., 2004. "An empirical investigation of the effects of impact fees on housing and land markets," Regional Science and Urban Economics, Elsevier, vol. 34(6), pages 639-661, November.
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