Hedonic Analysis of Housing Markets

This chapter examines the hedonic analysis of housing markets. These techniques have been widely applied in studies of the demand for housing attributes and environmental amenities. The chapter discusses the theoretical foundation of such analysis, the use of hedonic estimates of demand for welfare analysis, the empirical difficulties that arise in such studies, and some of the methods for overcoming these difficulties. The chapter has been prepared for the forthcoming Handbook of Applied Urban Economics.Housing, hedonic models, urban economics

Taxes Versus Regulation: The Welfare Impacts of Policies for Containing Sprawl

Our central concern in this paper is to examine some alternative policies for physically containing the growth of urban areas. We undertake a microsimulation to provide a comparison between land use planning policies that enforce an urban growth boundary and policies that limit development at the periphery using taxes. We parameterise our microsimulation using the structure of demand and policy implemented in a rapidly growing city in the south of England. We make no judgment as to the optimality or otherwise of the existing degree of constraint: we take that as datum and analyse only the welfare costs, distributional impacts and effects on urban densities of alternative ways of achieving the currently observed degree of constraint. The methodology we deploy to address these issues could be turned to a wide range of other urban modeling purposes. It has the advantage of being clearly founded in microeconomic theory and applies observed behavioural relationships, estimated from the relevant economic data. We find that the use of a tax on land could produce the same limitation on growth as existing regulatory policies but provide higher equilibrium welfare levels. We find that the use of a tax on transport costs, however, while capable of producing a compact urban form, would not raise welfare when compared with regulatory approaches.Urban Sprawl, Property Tax, Land Use Regulation

The Welfare Economics of Land Use Planning

This paper presents an empirical methodology for the evaluation of the beneÞts and costs of land use planning. The technique is applied in the context of the Town and Country Planning System of the UK, and examines the gross and net beneÞts of land use regulation and their distribution across income groups. The results show that the welfare and distributional impacts can be large.

Capitalising the Value of Free Schools: The Impact of Supply Constraints and Uncertainty

There has been a growing literature in both the US (for example Haurin and Brasington 1996, and Black 1999) and the UK (for example Gibbons & Machin, 2001) that estimates the way in which school quality is capitalised into house prices. Cheshire and Sheppard 1995 and 1999 have estimated hedonic models in which the quality of the secondary school to which a household was assigned was a significant variable. This provided evidence that the value of secondary school quality was being capitalised into the price of houses. In contrast Gibbons and Machin concluded that primary schools had an identifiable and significant price associated with their quality but that secondary schools did not. Their study did not have data for individual houses but used post-code sector data and then various techniques to standardised for all but one variable: either the notional primary school catchment area or the notional secondary school catchment area. Each of these analyses is predicated on the assumption that the value of local schools should be reflected in the value of houses. We expect variation in the capitalised price of a given school quality at either primary or secondary level according to the elasticity of supply of ‘school quality’ in the local market. This will vary systematically between and perhaps within cities and this paper explores the sources and the impact of such variations as well as the impact of model specification. Using an hedonic model and data from 1999-2000, we estimate values attached to both secondary school and primary school quality. The results support the conclusion that both secondary and primary school quality is capitalised into the market price of houses and that the capitalisation of school quality is discounted within the context of an urban area that is tightly constrained by land use planning in areas where new construction is concentrated. We also find evidence that appropriate model specification is imperative since bias is evident both when key neighbourhood characteristics are omitted and if the actual allocation of addresses to schools is not included. JEL: D12; H4; I2; R5

Capitalising the Value of Free Schools: The Impact of Supply Characteristics and Uncertainty

There has been a growing literature in both the US (for example Haurin and Brasington 1996, and Black 1999) and the UK (for example Gibbons & Machin, 2003) that estimates the way in which school quality is capitalised into house prices. Cheshire and Sheppard 1995 and 1999 estimated hedonic models in which the quality of the secondary school to which a household was assigned was a significant variable which provided evidence that secondary school quality was being capitalised into the price of houses. In contrast Gibbons and Machin concluded that primary schools were more significant. Each of these analyses is predicated on the assumption that the value of local schools should be reflected in the value of houses. We argue here that this is rather too simple. We should expect variation in the capitalised price of a given school quality at either primary or secondary level according to the elasticity of supply of 'school quality' in the local market, the certainty with which that quality can be expected to be maintained over time and the suitability of the dwelling to accommodate children. These factors will vary systematically between and perhaps within cities. This paper explores the sources and the impact of such variations as well as the impact of model specification. The results provide new evidence on the complex and subtle ways in which housing markets capitalise the value of local public goods such as school quality and perhaps most importantly suggest that this is highly non-linear: houses in the catchment areas of only the best state schools command substantial premiums but such capitalised values can be very substantial indeed.House values, hedonic models, public schools

Introducing Price Signals into Land Use Planning Decision-making - a Proposal

Although directed to the British system of land use planning this paper has relevance for many OECD countries. The paper starts by characterising the basic features of planning systems which seek to impose 'growth boundaries' as has been the case in Britain since 1947. In contrast to the planning literature this analyses such policies as an issue of resource allocation. A conclusion is that the system explicitly excludes any use of price signals from its decisions and effectively determines the supply of land for any use by fiat. Cumulatively over time the result has been to generate major distortions in land market prices. Because the planning system has deliberately constrained the supply of space, and space is an attribute of housing which is income elastic in demand, rising incomes not only drive rising real house prices but also mean that land prices have risen considerably faster than house prices. Several housing attributes other than garden space are to a degree substitutes for land but the underlying cause of the inelastic supply of housing in the UK is the constraint on land supply. The final section proposes a way of including the information embodied in the price premiums of neighbouring parcels of land zoned for different uses in determining land supply while safeguarding the underlying purposes of land use regulation. Such premiums signal the relative scarcity of land for different uses at each location and should become a key element in planning decision-making. If they were above some threshold, this should provide a presumption of development unless maintaining the land in its current use could be shown to be in the public interest. If combined with Impact Fees, such a change would not only make housing supply more elastic and the system more transparent but would help to distance land availability decisions from the political process.

Capitalising the Value of Free Schools: The Impact of Supply Characteristics and Uncertainty

There has been a growing literature in both the US (for example Haurin and Brasington 1996, and Black 1999) and the UK (for example Gibbons & Machin, 2003) that estimates the way in which school quality is capitalised into house prices. Cheshire and Sheppard 1995 and 1999 estimated hedonic models in which the quality of the secondary school to which a household was assigned was a significant variable which provided evidence that secondary school quality was being capitalised into the price of houses. In contrast Gibbons and Machin concluded that primary schools were more significant. Each of these analyses is predicated on the assumption that the value of local schools should be reflected in the value of houses. We argue here that this is rather too simple. We should expect variation in the capitalised price of a given school quality at either primary or secondary level according to the elasticity of supply of 'school quality' in the local market, the certainty with which that quality can be expected to be maintained over time and the suitability of the dwelling to accommodate children. These factors will vary systematically between and perhaps within cities. This paper explores the sources and the impact of such variations as well as the impact of model specification. The results provide new evidence on the complex and subtle ways in which housing markets capitalise the value of local public goods such as school quality and perhaps most importantly suggest that this is highly non-linear: houses in the catchment areas of only the best state schools command substantial premiums but such capitalised values can be very substantial indeed.House values, hedonic models, public schools

Capitalising the value of free schools : the impact of supply characteristics and uncertainty.

There has been a growing literature in both the US (for example Haurin and Brasington 1996, and Black 1999) and the UK (for example Gibbons & Machin, 2003) that estimates the way in which school quality is capitalised into house prices. Cheshire and Sheppard 1995 and 1999 estimated hedonic models in which the quality of the secondary school to which a household was assigned was a significant variable which provided evidence that secondary school quality was being capitalised into the price of houses. In contrast Gibbons and Machin concluded that primary schools were more significant. Each of these analyses is predicated on the assumption that the value of local schools should be reflected in the value of houses. We argue here that this is rather too simple. We should expect variation in the capitalised price of a given school quality at either primary or secondary level according to the elasticity of supply of ‘school quality’ in the local market, the certainty with which that quality can be expected to be maintained over time and the suitability of the dwelling to accommodate children. These factors will vary systematically between and perhaps within cities. This paper explores the sources and the impact of such variations as well as the impact of model specification. The results provide new evidence on the complex and subtle ways in which housing markets capitalise the value of local public goods such as school quality and perhaps most importantly suggest that this is highly non-linear: houses in the catchment areas of only the best state schools command substantial premiums but such capitalised values can be very substantial indeed.

The Laws of War in the Pre-Dawn Light: Institutions and Obligations in Thucydides' Peloponnesian War

This Essay in honor of Oscar Schachter criticizes both ahistorical renderings of the law of war and realist depictions of Peloponnesian War by asking whether Thucydides describes the conditions of a law of war. Examining the history in detail, Sheppard considers whether Thucydides described a sufficient institutional structure to recognize and enforce an intermunicipal law during war, as well as concepts of jus ad bellum and jus in bello. Despite the tradition of reading Thucydides as a realist, this Essay concludes that a more accurate reading would be that Thucidydes not only describes a form of a law of war but provided ample evidence of the benefits of its acceptance and the dangers of its breach

Teach Justice

To his fresh, young law students, Karl Llewellyn admitted that law schools, at least in the first year, aim “to get you ‘thinking like a lawyer.’” This moral power was intended to revive in the second year, when law students bring their “ethics out from under ether” but in a form “no longer at war with law or preventing you from seeing the legal question, but informing law, helping you solve and criticize . . . .” Nonetheless, law students’ ethics are hardly revived after the second year. Llewellyn and his followers so thoroughly purged most discussion of genuine ethics from the initial curriculum that law students and lawyers are now taught a process and not a purpose for the law. The thin ethics of professional responsibility and the cabined moral clash of constitutional law can hardly be said to develop a sense of right and wrong, or to enhance students’ skills in moral judgment. The result is an art wholly of technique and no aesthetic