The Reduced Form Price Elasticity of Housing

Richard Arnott

Working Paper from Economics Department, Queen's University

Abstract: This paper focusses on the supply side of the housing market. Two new elasticities are introduced. The elasticity of supply of structures on a fixed area of land relates the increase in the average cost of building structures to structural density. The reduced form price elasticity of housing on a fixed area of land characterizes the relationship between the equilibrium price of housing and equilibrium housing density as land price varies. Finally, there is a discussion of the correct modelling strategy to determine the effects of a housing subsidy, an increase in the property tax, on housing prices in a city. A simple, general equilibrium model of the city is required.

Pages: 21
Date: 1975
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Journal Article: The reduced form price elasticity of housing (1978)
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