Housing Supply and Suppliers: Are the Microeconomics of Housing Developers Important?

Abstract

In this paper, I review the US, UK and international literature on the responsiveness of housing supply to demand. This is a well-developed area of the literature, but I put forward two new arguments: that developers face downward sloping demand curves in the housing market, and that housing developers as firms are sufficiently heterogenous that their output decisions cannot be generalised. I draw on the international literature but use the recent UK experience as a lens, arguing that the post Barker review planning policy and housing supply reforms did not yield as much additional housing supply as had been hoped and expected by policy markets and the housing development industry itself. After introducing two specific propositions, I present new statistical estimates that are at least highly suggestive that firm-specific factors are of importance in understanding supply responsiveness.

Keywords::

• housebuilders
• housing supply
• affordability
• developers
• house prices

Acknowledgements

I am indebted to Alex Schwartz, North American editor of Housing Studies, for all his efforts in organising that conference and assembling this special issue. I would also like to thank Kate Barker and David Miles for their valuable comments, my colleagues Glen Bramley for Geoff Meen and Craig Watkins for their assistance in sourcing and thinking about data-sets, and for providing feedback on earlier drafts. All errors and omissions do, of course, remain my own responsibility.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 My thanks to Professor Craig Watkins, University of Sheffield, for facilitating access to this data-set.

2 I am grateful to my colleague Glen Bramley for facilitating access to these indicators.

3 The last Wellings handbook was published in 2006, containing data relevant to the preceding calendar year.

Additional information

Funding

I gratefully acknowledge the generous financial support of the Housing Studies Charitable Trust and the Rockefeller Foundation in supporting a Housing Studies themed conference in New York in 2012, making the presentation of an earlier version of this paper possible.