Long-run urban dynamics: understanding local housing market change in London

Recently, a literature has emerged using empirical techniques to study the evolution of international cities over many centuries; however, few studies examine long-run change within cities. Conventional models and concepts are not always appropriate and data issues make long-run neighbourhood analysis particularly problematic. This paper addresses some of these points. First, it discusses why the analysis of long-run urban change is important for modern urban policy and considers the most important concepts. Second, it constructs a novel data set at the micro level, which allows consistent comparisons of London neighbourhoods in 1881 and 2001. Third, the paper models some of the key factors that affected long-run change, including the role of housing. There is evidence that the relative social positions of local urban areas persist over time but, nevertheless, at fine spatial scales, local areas still exhibit change, arising from aggregate population dynamics, from advances in technology, and also from the effects of shocks, such as wars. In general, where small areas are considered, long-run changes are likely to be greater, because individuals are more mobile over short than long distances. Finally, the paper considers the implications for policy

On the long-run solution to aggregate housing systems

This paper explores the properties of dynamic aggregate housing models. In conventional models, in response to demand shocks, the primary adjustment mechanism is through prices and changes in housing supply. However, the size of the supply response depends on the price elasticity of supply and in countries such as the UK where the elasticity is low, house prices can rise sharply, worsening affordability. But this ignores the roles of housing risk and credit markets which affect the user cost of capital and the paper demonstrates that models that explicitly introduce a housing risk premium have an additional price stabiliser. The importance is shown through stochastic simulations; these simulations also demonstrate that conventional models used for forecasting and policy analysis may overstate future house price growth

Spatial housing economics: a survey

This introduction to the Virtual Special Issue surveys the development of spatial housing economics from its roots in neo-classical theory, through more recent developments in social interactions modelling, and touching on the role of institutions, path dependence and economic history. The survey also points to some of the more promising future directions for the subject that are beginning to appear in the literature. The survey covers elements hedonic models, spatial econometrics, neighbourhood models, housing market areas, housing supply, models of segregation, migration, housing tenure, sub-national house price modelling including the so-called ripple effect, and agent-based models. Possible future directions are set in the context of a selection of recent papers that have appeared in Urban Studies. Nevertheless, there are still important gaps in the literature that merit further attention, arising at least partly from emerging policy problems. These include more research on housing and biodiversity, the relationship between housing and civil unrest, the effects of changing age distributions - notably housing for the elderly - and the impact of different international institutional structures. Methodologically, developments in Big Data provide an exciting framework for future work

THE UNIVERSITY OF READING DEPARTMENT OF ECONOMICS On the Long-Run Relationship Between Industrial Construction and Housing 1 On The Long-Run Relationship Between Industrial Construction and Housing

Abstract Most empirical analysis of property development treats the sub-components of the construction industry as independent of each other. For example, models of housing construction typically do not consider any possible relationship with industrial or commercial construction. New building and repair and maintenance are rarely modelled jointly. But, in fact, there are a number of ways in which changes over time may be interdependent. For example, since similar labour skills are required across the sub-sectors and aggregate labour supply is not perfectly elastic, expansion in one sector might impose constraints on others. Furthermore, economic theory suggests that, under some conditions, housing investment crowds out industrial and commercial investment in a general equilibrium framework. In general, therefore, if there are any interdependencies, the presumption is that the relationship is negative. In this paper, we test the interdependencies between the sectors, concentrating particularly on the relationship between new housing and industrial construction. We find that, in the long run, based on Johansen tests for British data since the sixties, the relationship is positivemovements in the two are complementary. At first sight, this result is counter-intuitive, at least in an aspatial setting. However the result can be explained once a spatial dimension is added to the analysis, taking account of firm location decisions. Weak exogeneity tests indicate that, for the industrial sector, "jobs move to workers" rather than "workers moving to jobs" as standard residential location theory might suggest. Therefore a positive relationship occurs between housing and industrial construction, particularly in southern England, as newly-forming and relocating firms seek out highly skilled workers who, in turn, seek out high quality housing locations.

The Measurement of Rationing and the Treatment of Structural Change in the UK Mortgage Market.

U.K. mortgage markets have undergone major structural changes in the past few years, resulting in mortgages no longer being rationed. The ending of rationing has implications for the specification of empirical models of housing demand. Housing models have never adequately resolved how to incorporate unobservable mortgage rationing. Conventional proxy methods are particularly unsuitable, when rationing ceases. In this paper, we propose a new way of measuring rationing directly, which incorporates regime switching. The model of rationing is extensively tested and estimates of rationing for the period 1963-88 are provided; these may be easily incorporated into housing demand studies. Copyright 1990 by John Wiley & Sons, Ltd.

Local Housing Supply and the Impact of History and Geography

This paper considers the impact of existing land use patterns on housing supply price elasticities in local areas of England, under existing planning policies. The paper demonstrates that, despite common national planning policies, local supply responses to market pressures vary considerably, because of differences in historical land uses. The study area covers the Thames Gateway and Thames Valley, which lie to the east and west of London respectively. However, whereas the latter is one of the wealthiest areas of England, the former includes some of the highest pockets of deprivation and was a government priority area for increasing housing supply. Due to differences in historical land use and geography, the price elasticity in the least constrained area is approximately six times higher than the most constrained.

House Price Appreciation, Transactions and Structural Change in the British Housing Market: A Macroeconomic Perspective

This paper constitutes the first of two interrelated studies and is concerned with the relationship between house prices and transactions. Using aggregate time-series data, we find a strong relationship in Britain between the two variables, but the relationship changed during the 1990s. Transactions became much lower. We suggest that structural changes in macroeconomic relationships are increasingly likely to occur in a world of greater inequality and our results are one symptom. We argue that macroeconomic estimation needs to be complemented by careful microeconomic analysis. The second study, also appearing in this issue, therefore examines the microeconomic aspects of the issue. Copyright 2003 American Real Estate and Urban Economics Association