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Why delay? Understanding the construction lag, aka the build out rate

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  • Michael Ball
  • Paul Cheshire
  • Christian A. L. Hilber
  • Xiaolun Yu

Abstract

We explore the determinants of the speed of residential development after dwelling construction starts. Using a sample of over 140,000 residential developments in England from 1996 to 2015 and employing an instrumental variable- and fixed effects-strategy, we find that positive local demand shocks reduce the construction duration in a location with average supply constraints and developer local market power. However, this reduction is less pronounced in areas (i) where local planning is more restrictive, (ii) that are more built-up, and (iii) where competition in the local development sector is lower. We provide a model that rationalises these results. Our findings imply that the slow build out rate in England is the consequence of both market and policy failures.

Suggested Citation

  • Michael Ball & Paul Cheshire & Christian A. L. Hilber & Xiaolun Yu, 2024. "Why delay? Understanding the construction lag, aka the build out rate," CEP Discussion Papers dp1990, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1990
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    References listed on IDEAS

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    Keywords

    construction lag; land use regulation; market power; housing supply; housing demand; housing market dynamics;
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