October 1, 2012
The Impact of Supply Constraints on House Prices in England
We explore the impact of different types of supply constraints on house prices in England by exploiting a unique panel dataset of 353 local planning authorities ranging from 1974 to 2008.
Using 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 long-run impact on the house price-earnings elasticity;
- The effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas;
- Uneven topography has a quantitatively less meaningful impact;
- The effects of supply constraints are greater during boom than bust periods.