Recent advances in modelling housing investment in the UK and the United States have centred on estimation of price elasticity of supply and on estimating key relationships in the behaviour of housing prices and construction output at regional level. Yet, there are two main limitations evident in existing knowledge. First, the extent to which many operational models reconcile with underlying economic theory is limited. For example, a number of published studies fail to find construction costs or land prices to be significant predictors of new housing investment. Second, the recent focus on national and regional models has had the result that the impact of planning controls on housing investment, and price elasticity of supply in particular, is not generally well understood. Drawing on a recent project funded by the UK Government’s National Housing and Planning Advice Unit, this paper compares several approaches to modelling new housing investment at regional level in England. It advances a multi-equation approach to explain new housing construction and the behaviour of house prices. Significantly, the suggested modelling approach includes explicit recognition of the endogeneity of residential development land prices and planning controls
