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Housing affordability: Is new local supply the key?

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  • Bernard Fingleton
  • Franz Fuerst
  • Nikodem Szumilo

Abstract

This paper seeks to predict the impact of future housing supply on the affordability of residential space in the United Kingdom, using quantitative model-based simulation methods. Our spatially disaggregated analysis focuses on the greater South East region, approximately within 1.5 hours commuting time from Central London. A dynamic spatial panel model is applied to account for observed temporal variations in property prices and housing affordability across districts. The dynamic structure of this model allows us to assess the scale and extent of knock-on effects of local supply shocks in one district on other districts in the region. These complex spatial effects have been largely ignored in local or regional housing market forecasting models to date. Applying this model, we are able to demonstrate that local house prices and affordability are not only determined by the underlying supply and demand conditions in the market in question, but also depend crucially on conditions in neighbouring housing markets whose properties can be considered close substitutes within a larger regional housing market. We also show that increasing housing supply in the most critical areas has little impact on (both local and regional) affordability, even if wages do not change in response to an increase in employment.

Suggested Citation

  • Bernard Fingleton & Franz Fuerst & Nikodem Szumilo, 2019. "Housing affordability: Is new local supply the key?," Environment and Planning A, , vol. 51(1), pages 25-50, February.
  • Handle: RePEc:sae:envira:v:51:y:2019:i:1:p:25-50
    DOI: 10.1177/0308518X18798372
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    Cited by:

    1. Szumilo, Nikodem & Vanino, Enrico, 2021. "Mortgage affordability and entrepreneurship: Evidence from spatial discontinuity in Help-to-Buy equity loans," Journal of Business Venturing, Elsevier, vol. 36(4).
    2. Ali Sharghi & Abdolmajid Nourtaghani & Mehrnaz Ramzanpour & Reza Bagheri Gorji, 2022. "Low-income housing location based on affordable criteria Using AHP Model and GIS Technique (Case Study: Babolsar City)," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(8), pages 10337-10377, August.
    3. Cameron K. Murray, 2021. "Marginal and average prices of land lots should not be equal: A critique of Glaeser and Gyourko’s method for identifying residential price effects of town planning regulations," Environment and Planning A, , vol. 53(1), pages 191-209, February.
    4. Ying Cao & Daichun Yi & Youqin Huang & Yang Zhu, 2024. "Mismatches between the Supply and Demand of Public Rental Housing in Chinese Cities," Sustainability, MDPI, vol. 16(19), pages 1-20, September.
    5. Elvin Wyly, 2022. "YIMBY: The Latest Frontier of Gentrification," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 46(2), pages 319-330, March.
    6. Mario Andres Fernandez & Shane L. Martin, 2021. "Affordable housing policies in a post-COVID aftermath," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 15(1), pages 126-144, April.

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