The impact of supply constraints on house prices in England

Christian Hilber and Wouter Vermeulen

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: house prices; housing supply; supply constraints; land use regulation (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2012-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

Downloads: (external link)
http://eprints.lse.ac.uk/59254/ Open access version. (application/pdf)

Related works:
Journal Article: The Impact of Supply Constraints on House Prices in England (2016)
Working Paper: The impact of supply constraints on house prices in England (2016)
Working Paper: The impact of supply constraints on house prices in England (2013)
Working Paper: The Impact of Supply Constraints on House Prices in England (2012)
Working Paper: The Impact of Supply Constraints on House Prices in England (2012)
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