The Impact of Supply Constraints on House Prices in England

Income Taxes, Sorting and the Costs of Housing: Evidence from Municipal Boundaries in Switzerland*

“…6 Factors such as immigration and scarcity of constructible land have led to increasing demand for housing in recent years. At the same time, the supply-side response to the increase in demand was low due to factors such as spatial planning rigidities (see the 2015 OECD Economic Survey of Switzerland for an overview; see also Hilber and Vermeulen, 2016). This shows in a vacancy rate of only 0.95% in 2012 in Switzerland.…”

Distinctively Different: A New Approach to Valuing Architectural Amenities

“…The downside of many spatial planning policies that seek to correct for market failures is an interference with private decisions that can lead to unintended economic costs. To name a few examples, planning systems around the world have been challenged on the grounds of limiting supply of housing and office space, creating affordability problems and reducing productivity (Glaeser et al, 2005;Cheshire and Hilber, 2008;Brenner and M€ uhlig, 2013;Capasso et al, 2013;Hilber and Vermeulen, 2016;Cheshire et al, 2015). More specifically, many have blamed planning restrictions in England with creating an economic paradox of rapidly rising house prices (which have in the last 15 years tripled in England and quadrupled in London) and historically low construction levels (Cheshire, 2014).…”

United Kingdom: Selected Issues

“…24 Note: Dependent variable is the average annual growth rate of real weekly earnings of a male worker in 1979-2008. The measure of housing regulations is the average refusal rate of major residential projects by the local planning authorities between 1979 and 2008, which we take from Hilber and Vermeulen (2015). A higher refusal rate means more restrictive local housing regulations.…”

“…Results are in line with Biswas et al (2009), who study inter-regional migration in England, Wales, Scotland and Northern Ireland, and Rabe and Taylor (2010), who analyze internal migration flows using household-level data for 11 regions in the UK. In turn, Hilber and Vermeulen (2015) show that housing prices are significantly (causally) affected by housing regulations. 21 The impact is economically large: if the South East (the most regulated English region) had the regulatory restrictiveness of the North East, house prices in the South East would have been roughly 25 percent lower in 2008.…”

“…Data on local housing regulatory restrictions for 46 English counties is used to test whether housing restrictions have affected interregional convergence in the UK. The specification, following Ganong and Shoag (2015), models the change in workers' real earnings between 1979 and 2008 as a function of its starting level in 1979, a measure of severity of housing restrictions in the same period from Hilber and Vermeulen (2015), and an interaction term of the two variables (Table 1). 23 The coefficient on the starting level of earnings is significant and negative, suggesting income convergence between counties with low initial earnings and counties with a high starting level of earnings.…”