The Impact of Supply Constraints on House Prices in England

C.A.L. Hilber, W. Vermeulen

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

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 between 1974 and 2008. Exploiting exogenous variation from a policy reform, vote shares and historical density to identify the endogenous constraints-measures, we find that: regulatory constraints have a substantive positive impact on the house price-earnings elasticity; the effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas; and uneven topography has a quantitatively less meaningful impact.
Original languageEnglish
Pages (from-to)358-405
JournalEconomic Journal
Volume126
Issue number591
DOIs
Publication statusPublished - 2016

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House prices
England
Policy reform
Planning
Vote
Scarcity
Elasticity
Prediction
Authority

Cite this

Hilber, C.A.L. ; Vermeulen, W. / The Impact of Supply Constraints on House Prices in England. In: Economic Journal. 2016 ; Vol. 126, No. 591. pp. 358-405.
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The Impact of Supply Constraints on House Prices in England. / Hilber, C.A.L.; Vermeulen, W.

In: Economic Journal, Vol. 126, No. 591, 2016, p. 358-405.

Research output: Contribution to JournalArticleAcademicpeer-review

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AB - 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 between 1974 and 2008. Exploiting exogenous variation from a policy reform, vote shares and historical density to identify the endogenous constraints-measures, we find that: regulatory constraints have a substantive positive impact on the house price-earnings elasticity; the effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas; and uneven topography has a quantitatively less meaningful impact.

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