Local Economic Conditions and the Nature of New Housing Supply

SERC Discussion Paper No. 164

44 Pages Posted: 30 Oct 2014

See all articles by Christian A. L. Hilber

Christian A. L. Hilber

London School of Economics (LSE) - Department of Geography and Environment; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); Spatial Economics Research Centre (SERC)

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics; Tinbergen Institute

Wouter Vermeulen

CPB Netherlands Bureau of Economic Policy Research; VU University Amsterdam - Department of Spatial Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 1, 2014

Abstract

We present a modified open monocentric city model that assumes that land is available for conversion into new housing throughout the city. The model predicts that positive local income shocks (i) increase the city’s share of multi-family housing in new construction and (ii) lead to the construction of smaller units. We exploit the metro area samples of the American Housing Survey from 1984 to 2004 and find support for both predictions. We confirm that the adjustment process is driven by migration and is hindered by strict local land use control. Our findings imply that tight regulation may hamper metro area level labor market adjustment to positive economic shocks not only through limits on the quantity of newly supplied units but also by constraining their type to single-family houses and larger units that may be less suitable for would-be-migrants.

Keywords: Local economic conditions, open monocentric city model, land conversion, housing supply, housing type, housing consumption, land use regulation, migration

JEL Classification: R11, R21, R31, R52

Suggested Citation

Hilber, Christian A. L. and Rouwendal, Jan and Vermeulen, Wouter, Local Economic Conditions and the Nature of New Housing Supply (August 1, 2014). SERC Discussion Paper No. 164. Available at SSRN: https://ssrn.com/abstract=2516055 or http://dx.doi.org/10.2139/ssrn.2516055

Christian A. L. Hilber (Contact Author)

London School of Economics (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Spatial Economics Research Centre (SERC) ( email )

United Kingdom

Jan Rouwendal

VU University Amsterdam - Department of Spatial Economics ( email )

De Boelelaan 1105
1081HV Amsterdam
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Wouter Vermeulen

CPB Netherlands Bureau of Economic Policy Research ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

VU University Amsterdam - Department of Spatial Economics

De Boelelaan 1105
1081HV Amsterdam
Netherlands

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