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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Christian A. L. Hilber and Wouter Vermeulen

1 March 2016

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The Economic Journal 126(591) 2016

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DOI: 10.1111/ecoj.12213

https://academic.oup.com/ej/article/126/591/358/5077428

This Journal article is published under the centre's Urban programme.

This publication comes under the following theme: Urban inequality: The role of urban amenities, housing, infrastructure