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http://ssrn.com/abstract=470620
 
 

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Why is Manhattan So Expensive? Regulation and the Rise in House Prices


Edward L. Glaeser


Harvard University - John F. Kennedy School of Government, Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Joseph Gyourko


University of Pennsylvania - Real Estate Department; National Bureau of Economic Research (NBER)

Raven E. Saks


U.S. Federal Reserve - Division of Research and Statistics

November 2003

Harvard Institute of Economic Research Discussion Paper No. 2020

Abstract:     
In Manhattan and elsewhere, housing prices have soared over the 1990s. Rising incomes, lower interest rates, and other factors can explain the demand side of this increase, but some sluggishness on the supply of apartment buildings also is needed to account for the high and rising prices. In a market dominated by high rises, the marginal cost of supplying more space is reflected in the cost of adding an extra floor to any new building. Home building is a highly competitive industry with almost no natural barriers to entry, yet prices in Manhattan currently appear to be more than twice their supply costs. We argue that land use restrictions are the natural explanation of this gap. We also present evidence consistent with our hypothesis that regulation is constraining the supply of housing so that increased demand leads to much higher prices, not many more units, in a number of other high price housing markets across the country.

Number of Pages in PDF File: 54

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Date posted: November 18, 2003  

Suggested Citation

Glaeser, Edward L. and Gyourko, Joseph and Saks, Raven E., Why is Manhattan So Expensive? Regulation and the Rise in House Prices (November 2003). Harvard Institute of Economic Research Discussion Paper No. 2020. Available at SSRN: http://ssrn.com/abstract=470620 or http://dx.doi.org/10.2139/ssrn.470620

Contact Information

Edward L. Glaeser (Contact Author)
Harvard University - John F. Kennedy School of Government, Department of Economics ( email )
Littauer Center
Room 315A
Cambridge, MA 02138
United States
617-496-2150 (Phone)
617-496-1722 (Fax)
Brookings Institution
1775 Massachusetts Ave. NW
Washington, DC 20036-2188
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Joseph E. Gyourko
University of Pennsylvania - Real Estate Department ( email )
Philadelphia, PA 19104-6330
United States
215-898-3003 (Phone)
215-573-2220 (Fax)

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Raven E. Saks
U.S. Federal Reserve - Division of Research and Statistics ( email )
20th and C Streets, NW
Washington, DC 20551
United States
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