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Offices scarce but housing scarcer: estimating the premium for London office conversions

Cheshire, Paul and Kaimakamis, Katerina (2021) Offices scarce but housing scarcer: estimating the premium for London office conversions. Real Estate Economics. ISSN 1080-8620

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Identification Number: 10.1111/1540-6229.12345

Abstract

British planning is among the most restrictive in the world and has been restrictive for longer than elsewhere. Restrictive regulation substantially increases the costs of office space and, especially in London, increases the house prices. Partly in response to the crisis in housing supply an automatic right to convert offices to residential use was introduced in 2013. Some major office locations in central London and Manchester were excluded from this relaxation. We exploit the resulting boundary discontinuities to estimate the impact on prices of the new right to convert offices to housing. Using a panel data set of some 2,000 office transactions between 2009 and 2016, we find a significant increase in the price of offices eligible for this automatic conversion: our central estimate is a premium of 50%. This result demonstrates that London's restrictions on the supply of housing were substantially more severe than those on offices–already estimated to have been tighter than anywhere else in Europe. This article contributes to the small literature analyzing the restrictive effect of regulation on offices and is, as far as we are aware, the first analyzing regulatory restriction on offices relative to housing.

Item Type: Article
Official URL: https://onlinelibrary.wiley.com/journal/15406229
Additional Information: © 2021 American Real Estate and Urban Economics Association
Divisions: Geography & Environment
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HT Communities. Classes. Races
Date Deposited: 04 Mar 2021 14:00
Last Modified: 20 Sep 2021 03:20
URI: http://eprints.lse.ac.uk/id/eprint/108952

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