The Impact of Supply Constraints on House Prices in England

We explore the impact of different types of supply constraints on house prices in England by exploiting a unique panel dataset of 353 local planning authorities ranging from 1974 to 2008. Using exogenous variation from a policy reform, vote shares and historical density to identify the endogenous constraints-measures, we find that:<ol><li>Regulatory constraints have a substantive positive long-run impact on the house price-earnings elasticity;</li><li>The effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas;</li><li>Uneven topography has a quantitatively less meaningful impact;</li><li>The effects of supply constraints are greater during boom than bust periods.</li></ol>