Planning and Housing Supply in Two-speed Britain: Modelling Local Market Outcomes

Abstract

Economic research on UK housing markets has only recently got to grips with measuring and modelling the impact of planning and other public interventions, although their importance has long been recognised in theory. The interurban panel dataset utilised in this study does represent a step forward, by permitting more robust econometric estimation and by incorporating a wider, more balanced range of determinant factors. A coherent set of relationships governing the key market outcomes-house prices, new building, migration and vacancies-can be established. The modelling framework is used to explore differences in behavioural responses between markets in 'high' and 'low' demand states. Simulations are used to track the impact on market outcomes of different policy strategies applied in different types of locality. Supply measures needed to achieve national targets for house price growth reduction are assessed. Measures acting on both demand-side and supply-side variables in areas of high and low demand are compared. These suggest that output is more sensitive than price to policies and that quite strong, concerted policies would be needed to impact significantly on the major market imbalances currently seen.