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

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Listed:
  • Cheshire, Paul
  • Hilber, Christian A.L.

Abstract

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.

Suggested Citation

  • Cheshire, Paul & Hilber, Christian A.L., 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.
    • Handle: RePEc:ehl:lserod:4372
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    File URL: http://eprints.lse.ac.uk/4372/
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    References listed on IDEAS

    as
    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. 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. 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.
    4. 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.
    5. Paul Cheshire & Stephen Sheppard, 2004. "The Introduction of Price Signals into Land Use Planning," Urban/Regional 0410002, EconWPA.
    6. John Muellbauer, 2005. "Property Taxation and the Economy after the Barker Review," Economic Journal, Royal Economic Society, vol. 115(502), pages 99-117, March.
    7. 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, July.
    8. Mayer, Christopher J. & Somerville, C. Tsuriel, 2000. "Land use regulation and new construction," Regional Science and Urban Economics, Elsevier, vol. 30(6), pages 639-662, December.
    9. Cheshire, P. C. & Sheppard, Stephen Charles, 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.
    10. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2013. "Superstar Cities," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 167-199, November.
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    12. repec:arz:wpaper:eres2007-119 is not listed on IDEAS
    13. 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.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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