Construction Costs and the Supply of Housing Structure

20 Pages Posted: 14 Sep 2006

See all articles by Joseph Gyourko

Joseph Gyourko

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

Albert Saiz

MIT Department of Urban Studies and Planning; IZA Institute of Labor Economics

Abstract

Construction costs account for the bulk of the price of new houses in most markets, but their study has been relatively neglected. We document that there are economically large differences in construction costs across U.S. housing markets. We also estimate a very elastic supply for physical structure; hence, differences in construction activity across markets do not explain the variation in costs. Supply shifters that collectively do account for differences in building costs include the extent of unionization within the construction sector, local wages, local topography in terms of the presence of high hills and mountains, and the local regulatory environment.

Suggested Citation

Gyourko, Joseph E. and Saiz, Albert, Construction Costs and the Supply of Housing Structure. Journal of Regional Science, Vol. 46, No. 4, pp. 661-680, October 2006. Available at SSRN: https://ssrn.com/abstract=930200 or http://dx.doi.org/10.1111/j.1467-9787.2006.00472.x

Joseph E. Gyourko (Contact Author)

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

Albert Saiz

MIT Department of Urban Studies and Planning ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States
617-252-1687 (Phone)
617-258-6991 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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