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.