A Long-Run Model of Housing Affordability

Abstract

1 An appendix setting out the details of the model equations can be found on the author's web site at http://www.reading.ac.uk/economics/about/staff/g-p-meen.aspx 2 See Meen (2010) for a discussion of the issues. 3 Over the period 1971 to 2009, the UK trend rate rose to over 3% pa.2007 recession, but access to housing for first-time buyers did not improve, because of the shortage of mortgage funds. Although the user cost of capital can, in principle, take account of credit restrictions, price/earnings ratios do not. The importance of the different measures for policy is discussed further in Section 5. 4 The NHPAU was disbanded by the new coalition government in June 2010.

Housebuilding, demographic change and affordability as outcomes of local planning decisions: Exploring interactions using a sub-regional model of housing markets in England

“…The Barker (2004) review recognised the importance of market processes and the key role of 'affordability' outcomes, and ushered in a phase of policy where economic models were given a role in influencing planning at the regional level (Meen, 2011;ODPM, 2005), although arguably this approach was not embedded at local level. However, after 2010 planning policy moved away from this 'top down' national-regional approach, with a new emphasis on localism accompanied by incentives and also a reliance upon judgements of the adequacy of the local evidence base for housing numbers.…”

Housing, Finance, Policy and the Wider Economy

“…Winkler (2016a) reviews the literature on housing supply. The nature of housing supply is found to help explain house price developments (e.g., Glaeser et al, 2008;Gyourko, 2009;Grimes & Aitken, 2010), housing affordability (e.g., Glaeser & Gyourko, 2002;Meen, 2011), cross-location income inequality (e.g., Glaeser et al, 2006;Saks, 2008), labor economics (e.g., Cannari et al, 2000;Andrews & Caldera Sanchez, 2011) and housing-related policy reform success (e.g., Swank et al, 2002;Hilber & Turner, 2014). Housing supply reform has great potential to enable the housing market to work better (Worldbank, 1993).…”

“…However, care needs to be taken when changing housing supply-related policies, as interventions can affect land prices, building costs, housing quality, housing suppliers' efficiency, housing supply flexibility and housing prices (e.g., Worldbank, 1993;Andrews, 2010). A cost and benefit analysis is therefore advised before implementing housing supply-related policies because changes can influence housing affordability, social inclusion, labor economics, resources consumption and environmental pollution (e.g., Worldbank, 1993;Glaeser & Gyourko, 2002;Andrews, 2010;Meen, 2011).…”

“…Residential mobility tends to be lower in an environment where housing market frictions are higher (Rupert & Wasmer, 2012) and access to credit is tighter (Andrews & Caldera Sanchez, 2011). In addition, negative housing equity tends to reduce residential mobility (Ferreira et al, 2012), and housing supply flexibility is associated with superior labor market outcomes (e.g., Glaeser & Gyourko, 2002;Andrews, 2010;Meen, 2011).…”

Exploring the Impact of the Recession on British Volume Housebuilders: A Behavioural Analysis

“…Rising household formation rates (DCLG 2010) remain unquenched by historically low levels of housing production. An increase in the house price-to-earnings ratio together with real rising house prices (Halifax 2015) is leading to worsening affordability (Fingleton 2008, Meen and Andrew 2008, Meen 2011, reaffirming housing's status as a basic human need (Leckie 1992, Edgar et al 2002 and reshaping traditional notions of housing as a commodity (Sweeney 1974, Pattillo 2013). …”