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The impact of supply constraints on house prices in England

Hilber, Christian A. L. and Vermeulen, Wouter (2012) The impact of supply constraints on house prices in England. SERC Discussion Papers (SERCDP0119). The London School of Economics and Political Science ,SERC Discussion Paper, London, UK.

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Abstract

i) This discussion paper, originally published September 2012, is a completely revised version from April 2014. We model the impact of local supply constraints on local house prices in a setting in which households with idiosyncratic tastes sort endogenously over heterogeneous locations. We test the theoretical prediction that house prices respond more strongly to changes in local earnings in places with tight supply constraints using a unique panel dataset of 353 local planning authorities in England ranging from 1974 to 2008. Exploiting 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; iv) The effects of supply constraints are greater during boom than bust periods; and v) Our findings are robust to using a labour demand shock measure as demand shifter.

Item Type: Monograph (Discussion Paper)
Official URL: http://rlab.lse.ac.uk/_new/publications/abstract.a...
Additional Information: © 2012 The Authors
Divisions: Spatial Economics Research Centre
Subjects: H Social Sciences > HB Economic Theory
Sets: Research centres and groups > Spatial Economics Research Centre
Date Deposited: 27 Aug 2014 13:49
Last Modified: 01 Jun 2020 23:12
Funders: Economic and Social Research Council, Department for Business, Innovation and Skills (BIS), Welsh Government
URI: http://eprints.lse.ac.uk/id/eprint/59254

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