IDEAS home Printed from https://ideas.repec.org/p/osf/osfxxx/4jmb8.html
   My bibliography  Save this paper

Explainer: Bad housing supply assumptions

Author

Listed:
  • Murray, Cameron

    (The University of Sydney)

Abstract

Glaeser and Gyourko (2003) (G&G) famously argued that if the marginal cost of a square metre of housing lot land is less than the average cost, this is evidence of a price effect from “artificial” supply constraints. They call this price gap a “regulatory tax”, but it is also known as a “zoning effect” or “zoning tax”. Their logic has been relied upon by hundreds of other studies and in numerous replications of their approach, including by economists from the Reserve Bank of Australia, whose results were widely publicised (Kendall and Tulip, 2018). However, the economic assumptions behind G&G’s approach are implausible. Although popular, their method should not be relied upon to infer anything about the nature of housing supply. This note explains why.

Suggested Citation

  • Murray, Cameron, 2021. "Explainer: Bad housing supply assumptions," OSF Preprints 4jmb8, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:4jmb8
    DOI: 10.31219/osf.io/4jmb8
    as

    Download full text from publisher

    File URL: https://osf.io/download/60a74c090b6c6900399c16a7/
    Download Restriction: no
    File URL: https://libkey.io/10.31219/osf.io/4jmb8?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Colwell, Peter F & Sirmans, C F, 1993. "A Comment on Zoning, Returns to Scale, and the Value of Undeveloped Land," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 783-786, November.
    2. Murray, Cameron, 2019. "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," OSF Preprints fnz7v, Center for Open Science.
    3. Edward Ludwig Glaeser & Joseph Gyourko, 2003. "The impact of building restrictions on housing affordability," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 21-39.
    4. Ross Kendall & Peter Tulip, 2018. "The Effect of Zoning on Housing Prices," RBA Research Discussion Papers rdp2018-03, Reserve Bank of Australia.
    5. Kirdan Lees, 2019. "Quantifying the costs of land use regulation: evidence from New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 53(3), pages 245-269, September.
    Full references (including those not matched with items on IDEAS)

    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. Murray, Cameron K., 2020. "Time is money: How landbanking constrains housing supply," Journal of Housing Economics, Elsevier, vol. 49(C).
    2. 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.
    3. Peter Phibbs & Nicole Gurran, 2021. "The role and significance of planning in the determination of house prices in Australia: Recent policy debates," Environment and Planning A, , vol. 53(3), pages 457-479, May.
    4. Murray, Cameron & Phibbs, Peter, 2022. "Evidence-lite zone: The weak evidence behind the economic case against planning regulation," OSF Preprints 69m23, Center for Open Science.
    5. Murray, Cameron, 2019. "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," OSF Preprints fnz7v, Center for Open Science.
    6. Murray, Cameron, 2020. "A housing supply absorption rate equation," OSF Preprints 7n8rj, Center for Open Science.
    7. Gyourko, Joe & Krimmel, Jacob, 2021. "The impact of local residential land use restrictions on land values across and within single family housing markets," Journal of Urban Economics, Elsevier, vol. 126(C).
    8. Keaton Jenner & Peter Tulip, 2020. "The Apartment Shortage," RBA Research Discussion Papers rdp2020-04, Reserve Bank of Australia.
    9. Cameron K. Murray, 2022. "A Housing Supply Absorption Rate Equation," The Journal of Real Estate Finance and Economics, Springer, vol. 64(2), pages 228-246, February.
    10. Richardson, Benjamin Felix, 2022. "Finance, food, and future urban zones: The failure of flexible development in Auckland, New Zealand," Land Use Policy, Elsevier, vol. 119(C).
    11. Quigley, John M. & Rosenthal, Larry A., 2005. "The Effects of Land-Use Regulation on the Price of Housing: What Do We Know? What Can We Learn?," Berkeley Program on Housing and Urban Policy, Working Paper Series qt90m9g90w, Berkeley Program on Housing and Urban Policy.
    12. Ritter, Matthias & Hüttel, Silke & Odening, Martin & Seifert, Stefan, 2020. "Revisiting the relationship between land price and parcel size in agriculture," Land Use Policy, Elsevier, vol. 97(C).
    13. Christian A. L. Hilber, 2017. "The Economic Implications of House Price Capitalization: A Synthesis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(2), pages 301-339, April.
    14. Gyourko, Joseph & Saiz, Albert, 2004. "Reinvestment in the housing stock: the role of construction costs and the supply side," Journal of Urban Economics, Elsevier, vol. 55(2), pages 238-256, March.
    15. John Landis & Vincent J. Reina, 2021. "Do Restrictive Land Use Regulations Make Housing More Expensive Everywhere?," Economic Development Quarterly, , vol. 35(4), pages 305-324, November.
    16. Rayman Mohamed, 2009. "Why Do Residential Developers Prefer Large Exurban Lots? Infrastructure Costs and Exurban Development," Environment and Planning B, , vol. 36(1), pages 12-29, February.
    17. Sevrin Waights, 2019. "The preservation of historic districts—is it worth it?," Journal of Economic Geography, Oxford University Press, vol. 19(2), pages 433-464.
    18. H. Spencer Banzhaf & Kyle Mangum, 2019. "Capitalization as a Two-Part Tariff: The Role of Zoning," NBER Working Papers 25699, National Bureau of Economic Research, Inc.
    19. Mi Diao & Yi Fan & Tien Foo Sing, 2018. "Demand restrictions; government interventions; resale public housing market; private housing market; housing wealth," ERES eres2018_32, European Real Estate Society (ERES).
    20. Tirthatanmoy Das & Kabir Dasgupta, 2018. "Evaluating the Impact of Mothers' Self-esteem on Early Childhood Home Environment: Evidence from NLSY," Working Papers 2018-03 JEL Classificatio, Auckland University of Technology, Department of Economics, revised Oct 2019.

    More about this item

    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:osf:osfxxx:4jmb8. 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: OSF (email available below). General contact details of provider: https://osf.io/preprints/ .

    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.