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The impact of supply constraints on house prices in England

  • Christian A. L. Hilber

    ()

    (London School of Economics & Spatial Economics Research Centre)

  • Wouter Vermeulen

    ()

    (CPB Netherlands Bureau for Economic Policy Analysis & VU University & Spatial Economics Research Centre)

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: i) Regulatory constraints have a substantive positive impact on the house price-earnings elasticity; ii) The effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas; iii) Uneven topography has a quantitatively less meaningful impact; and iv) The effects of supply constraints are greater during boom than bust periods.

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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2013/28.

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Length: 52 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:ieb:wpaper:2013/6/doc2013-28
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  2. Paciorek, Andrew, 2013. "Supply constraints and housing market dynamics," Journal of Urban Economics, Elsevier, vol. 77(C), pages 11-26.
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  8. Cheshire, Paul & Hilber, Christian A. L., 2007. "Office Space Supply Restrictions in Britain: The Political Economy of Market Revenge," MPRA Paper 5435, University Library of Munich, Germany.
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  15. Christian A. L. Hilber, 2010. "New Housing Supply and the Dilution of Social Capital," SERC Discussion Papers 0042, Spatial Economics Research Centre, LSE.
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  18. Raffaella Sadun, 2008. "Does planning regulation protect independent retailers?," LSE Research Online Documents on Economics 28503, London School of Economics and Political Science, LSE Library.
  19. Glaeser, Edward L. & Ward, Bryce A., 2009. "The causes and consequences of land use regulation: Evidence from Greater Boston," Journal of Urban Economics, Elsevier, vol. 65(3), pages 265-278, May.
  20. Marcy Burchfield & Henry G. Overman & Diego Puga & Matthew A. Turner, 2005. "Causes of sprawl: A portrait from space," Working Papers tecipa-192, University of Toronto, Department of Economics.
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  22. Todd M. Sinai & Nicholas S. Souleles, 2009. "Can Owning a Home Hedge the Risk of Moving?," NBER Working Papers 15462, National Bureau of Economic Research, Inc.
  23. 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.
  24. Muellbauer, John & Murphy, Anthony, 1997. "Booms and Busts in the UK Housing Market," CEPR Discussion Papers 1615, C.E.P.R. Discussion Papers.
  25. Christian A.L. Hilber, 2003. "Neighborhood externality risk and the homeownership status of properties," Proceedings 885, Federal Reserve Bank of Chicago.
  26. Henderson, J Vernon & Ioannides, Yannis M, 1983. "A Model of Housing Tenure Choice," American Economic Review, American Economic Association, vol. 73(1), pages 98-113, March.
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  28. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  29. Harter-Dreiman, Michelle, 2004. "Drawing inferences about housing supply elasticity from house price responses to income shocks," Journal of Urban Economics, Elsevier, vol. 55(2), pages 316-337, March.
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  33. 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.
  34. 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.
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