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

Author Info

Listed author(s):
  • Paul Cheshire
  • Christian A.L. Hilber

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.

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File URL: http://eprints.lse.ac.uk/4372/
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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 4372.

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Date of creation: Jun 2008
Publication status: Published in Economic Journal, June, 2008, 118(529), pp. F185-F221. ISSN: 0013-0133
Handle: RePEc:ehl:lserod:4372
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Find related papers by 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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  1. 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.
  2. 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.
  3. 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.
  4. 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, 06.
  5. repec:arz:wpaper:eres2007-119 is not listed on IDEAS
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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 331-369, October.
  12. Paul Cheshire & Stephen Sheppard, 1997. "Welfare Economics of Land Use Regulation," Urban/Regional 9702001, EconWPA.
  13. Paul Cheshire & Stephen Sheppard, 2004. "The Introduction of Price Signals into Land Use Planning," Urban/Regional 0410002, EconWPA.
  14. 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.
  15. John Muellbauer, 2005. "Property Taxation and the Economy after the Barker Review," Economic Journal, Royal Economic Society, vol. 115(502), pages 99-117, 03.
  16. 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.
  17. 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.
  18. 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.
  19. 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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