IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/65014.html
   My bibliography  Save this paper

Regulating housing vacancies away? The paradoxical effects of mismatch

Author

Listed:
  • Cheshire, Paul
  • Hilber, Christian A. L.
  • Koster, Hans R. A.

Abstract

Policy makers agree that vacant houses are undesirable. Moreover the existence of empty houses is used as an argument for allocating less land for new construction. So higher vacancy rates tend to trigger tighter restrictions on the supply of land. Such tighter restrictions lead to higher prices and, because of the incentives this creates for occupying housing, to lower housing vacancies (‘opportunity cost effect’). There is, however, a second effect ignored by planners: more restrictive planning policies impede the matching process in housing markets so leading to higher vacancies (‘mismatch effect’). Which of these two forces dominates is an empirical question. This is our focus here. Addressing potential reverse causation and other endogeneity concerns, we use a unique panel data set on land use regulation for 350 Local Authorities in England from 1981 to 2011. Our results show that tighter local planning constraints increase local housing vacancy rates, suggesting that the mismatch effect dominates. A one standard deviation increase in local regulatory restrictiveness causes the average local vacancy rate to increase by about 0.9 percentage points (23 percent). The results are economically meaningful and show that pointing to the existence of vacant houses as a reason for being more restrictive in allocating land for housing is counterproductive.

Suggested Citation

  • Cheshire, Paul & Hilber, Christian A. L. & Koster, Hans R. A., 2015. "Regulating housing vacancies away? The paradoxical effects of mismatch," LSE Research Online Documents on Economics 65014, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:65014
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/65014/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ismir Mulalic & Jos N. Van Ommeren & Ninette Pilegaard, 2014. "Wages and Commuting: Quasi‐natural Experiments' Evidence from Firms that Relocate," Economic Journal, Royal Economic Society, vol. 124(579), pages 1086-1105, September.
    2. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-1292, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hilber, Christian A. L. & Schöni, Olivier, 2016. "Housing policies in the United Kingdom, Switzerland, and the United States: lessons learned," LSE Research Online Documents on Economics 72818, London School of Economics and Political Science, LSE Library.
    2. Segú, Mariona & Vignolles, Benjamin, 2018. "Taxing Vacant Dwellings: Can fiscal policy reduce vacancy?," MPRA Paper 85508, University Library of Munich, Germany.
    3. Jeffrey P. Cohen & Cletus C. Coughlin & Jonas C. Crews, 2018. "Interregional Migration and Housing Vacancy: Theory and Empirics," Working Papers 2018-007, Federal Reserve Bank of St. Louis, revised 16 Oct 2020.
    4. Bilotkach, Volodymyr & Braakmann, Nils & Gonzalo-Almorox, Eduardo & Wildman, John, 2017. "The effect of house prices on the long-term care market: Evidence from England," MPRA Paper 81987, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cheshire, Paul & Hilber, Christian A.L. & Koster, Hans R.A., 2018. "Empty homes, longer commutes: The unintended consequences of more restrictive local planning," Journal of Public Economics, Elsevier, vol. 158(C), pages 126-151.
    2. Essi Eerola & Niku Maattanen, 2018. "Borrowing constraints and housing market liquidity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 27, pages 184-204, January.
    3. Jennifer Roberts & Karl Taylor, 2017. "Intra-household commuting choices and local labour markets," Oxford Economic Papers, Oxford University Press, vol. 69(3), pages 734-757.
    4. Charles Ka Yui Leung & Joe Cho Yiu Ng, 2018. "Macro Aspects of Housing," GRU Working Paper Series GRU_2018_016, City University of Hong Kong, Department of Economics and Finance, Global Research Unit.
    5. Li-Min Hsueh & Hsi-Peng Tseng & Chang-Chiang Hsieh, 2007. "Relationship Between the Housing Vacancy Rate, Housing Price, and the Moving Rate at the Township Level in Taiwan, in 1990 and 2000," International Real Estate Review, Global Social Science Institute, vol. 10(1), pages 119-150.
    6. S. Wong & C. Yiu & K. Chau, 2013. "Trading Volume-Induced Spatial Autocorrelation in Real Estate Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 46(4), pages 596-608, May.
    7. Kwame Addae-Dapaah, 2001. "Valuation Accuracy - A Problematic Enquiry," ERES eres2001_101, European Real Estate Society (ERES).
    8. de Wit, Erik R. & Englund, Peter & Francke, Marc K., 2013. "Price and transaction volume in the Dutch housing market," Regional Science and Urban Economics, Elsevier, vol. 43(2), pages 220-241.
    9. Gaetano Lisi, 2013. "Matching Models and Housing Markets: the Role of the Zero-Profit Condition," Economic Research Guardian, Weissberg Publishing, vol. 3(1), pages 54-60, June.
    10. Guillaume Rocheteau & Pierre‐Olivier Weill, 2011. "Liquidity in Frictional Asset Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(s2), pages 261-282, October.
    11. Koster, Hans R.A. & van Ommeren, Jos, 2020. "Housing search frictions and optimal search," Economics Letters, Elsevier, vol. 189(C).
    12. Hilber, Christian A.L. & Lyytikäinen, Teemu, 2017. "Transfer taxes and household mobility: Distortion on the housing or labor market?," Journal of Urban Economics, Elsevier, vol. 101(C), pages 57-73.
    13. Christian A. L. Hilber & Teemu Lyytikäinen, 2012. "The Effect of the UK Stamp Duty Land Tax on Household Mobility," SERC Discussion Papers 0115, Centre for Economic Performance, LSE.
    14. Andrew Benito, 2006. "How does the down-payment constraint affect the UK housing market?," Bank of England working papers 294, Bank of England.
    15. Steffen Andersen & Kasper Meisner Nielsen, 2017. "Fire Sales and House Prices: Evidence from Estate Sales Due to Sudden Death," Management Science, INFORMS, vol. 63(1), pages 201-212, January.
    16. Dröes, Martijn I. & Koster, Hans R.A., 2016. "Renewable energy and negative externalities: The effect of wind turbines on house prices," Journal of Urban Economics, Elsevier, vol. 96(C), pages 121-141.
    17. Wei Cui & Sören Radde, 2020. "Search-based Endogenous Asset Liquidity and the Macroeconomy [Why Don’t US Issuers Demand European Fees for IPOs?]," Journal of the European Economic Association, European Economic Association, vol. 18(5), pages 2221-2269.
    18. Giménez-Nadal, José Ignacio & Velilla, Jorge & Ortega-Lapiedra, Raquel, 2024. "Differences in commuting between employee and self-employed workers: The case of Latin America," Journal of Transport Geography, Elsevier, vol. 114(C).
    19. Lu Han & William C. Strange, 2014. "Bidding Wars for Houses," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(1), pages 1-32, March.
    20. Honglin Wang & Chu Zhang & Weihang Dai, 2013. "Rental Adjustment and Housing Prices: Evidence from Hong Kong's Residential Property Market," Working Papers 012013, Hong Kong Institute for Monetary Research.

    More about this item

    Keywords

    residential vacancy rates; housing supply constraints; land use regulation;
    All these keywords.

    JEL classification:

    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:65014. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.