Does Political Uncertainty Affect Residential Development?

Shikong Luo (), Owen Tidwell and Sherwood Clements ()
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Shikong Luo: The University of Oklahoma
Sherwood Clements: The University of Alabama

The Journal of Real Estate Finance and Economics, 2022, vol. 65, issue 4, No 2, 572-592

Abstract: Abstract This study examines the link between policy uncertainty and residential construction activities in the United States. Using a newly developed measure of political uncertainty, we find quarterly flow of state-level building permits to be negatively associated with aggregate political uncertainty. The negative impact of political uncertainty is more pronounced in states where the debt-to-income ratio or local economic variability is high. We also use gubernatorial elections as a plausible exogenous variation in political uncertainty. Compared to states without an upcoming gubernatorial election, we document a sharp decline in residential construction for states in the pre-election quarter when the state-specific political uncertainty is particularly high. These results suggest a non-negligible role of political uncertainty in residential construction activity.

Keywords: Residential development; Housing construction; Political uncertainty; Gubernatorial election (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11146-021-09867-9

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