Working Papers at Revise and Resubmit Stage

Abstract: We hypothesize that as the distance of a residential move increases, the cost of collecting information on the destination housing market rises, the amount and quality of information collected fall, and the chances of making an ill-informed housing purchase decision increases, reducing the likelihood of such a purchase. Since owning relative to renting is associated with a much larger financial commitment and much higher transaction costs, the propensity to own can be expected to decrease with the distance moved. Using data from the Survey of English Housing from 1993 to 2008, we document that, consistent with our prior, an increase in the distance moved by one standard deviation decreases the probability that a household owns the next home by 3.2 percentage points.

Working Papers: Submitted to Journal or In Progress

Abstract: Mortgage credit expansion policies – such as UK’s Help to Buy (HtB) – aim to increase access to and affordability of owner-occupied housing and are widespread around the world. We take advantage of spatial discontinuities in the HtB equity loan scheme, introduced in 2013, to explore the causal economic impacts and the effectiveness of this type of policies. Employing a Difference-in-Discontinuities design, we find that HtB increased house prices by more than the expected present value of the implied interest rate subsidy and had no discernible effect on construction volumes in the Greater London Authority (GLA), where housing supply is subject to severe long-run constraints and housing is already extremely unaffordable. HtB did increase construction numbers without affecting prices near the English/Welsh border, an area with less binding supply constraints and comparably affordable housing. HtB also led to bunching of newly built units below the price threshold, building of smaller new units and an improvement in the financial performance of developers. We conclude that credit expansion policies such as HtB may be ineffective in tightly supply constrained and already unaffordable areas.

Abstract: We identify the determinants of local house price and rent dynamics in England. Employing panel data for 353 Local Authorities (LAs) ranging from 1974 to 2018 (for house prices) and 1997 to 2018 (for rents), we demonstrate that house prices, rents, and the house price to rent-ratio respond more strongly to given contemporaneous labor demand shocks in LAs with tight regulatory constraints and physical barriers to development (i.e., long-term supply constraints). Our findings are consistent with a model that assumes (i) short-term construction lags and (ii) labor demand shocks that are serially correlated. Conditional on local demand and supply fundamentals, variables that capture the real economy at macro level are more important in explaining macro-level house price dynamics than credit conditions. The affordability crisis in Greater London is chiefly driven by strong and growing demand for housing in conjunction with tight long-run supply constraints rather than by global investor demand or interest rates.

Abstract: The austerity period in the years after the election of the UK’s coalition government in 2010 saw a marked decline in central to local government funding and a fall in expenditure on a range of local services, including social services. The incoming government’s vision of a ‘Big Society’ had been that individuals would step in with voluntary activity in the local community to fill the void left by withdrawal of public support. This paper asks to what extent this vision materialised. Using a large panel survey of individuals linked to detailed local area income and spending data for the period from 2008/9 until 2016/7 and employing a fixed effects and instrumental variables approach to deal with endogeneity concerns, we estimate the effect of local public social services spending on individual caring and other voluntary behaviour. We find that individual caring activity was largely unchanged over the period. Public spending cuts in a person’s residential area had no measurable impact on the proportion of people in individual caring roles. We find some weak evidence that voluntary activity (other than caring) responds to Local Authority (LA) spending, with increases in volunteering over the period and bigger cuts in public spending causing reductions in volunteering. However, all estimated effects are near zero.  Overall, we find little support for the proposition that (cutting) public sector spending crowds out (increases) individual voluntary activities.

Abstract: This paper exploits the panel structure of the ECHP micro data and uses fixed effects-specifications to identify the main determinants of equilibrium housing tenure outcomes across Europe between 1994 and 2001. The accommodation type which affects both the relative supply of and demand for owner-occupied housing has the strongest impact. Holding occupant and location characteristics (including preferences for homeownership) constant, a flat in a small apartment building has a roughly 40 percentage points lower probability of being owner-occupied than a detached house. Among the occupants’ characteristics, only age has a quantitatively meaningful positive impact. At the regional level, the housing stock composition and the share of public rental housing are the main identifiable determinants of the vast homeownership rate differentials. Tax policy reforms have only had relatively minor effects on homeownership attainment and, counter to widespread perception; spatial differences in intergenerational cohesion do not explain homeownership rate differentials.

Abstract: Town Centre First Policies (TCFP) were introduced in England with real rigour in 1996. They restricted new retail development to traditional ‘Town Centres’ with the declared aim of making cities more ‘sustainable’ and retaining access to shops to those without cars. TCFP were introduced without evidence to support these claims and to date have not been subject to any rigorous analysis of their actual impacts on travel patterns for shopping. This paper provides the first evidence of their impact on travel for shopping trips. We use novel data on local shopping travel for 1998 and 2008 to investigate this issue. First, we analyse how shopping travel was differently affected by changes in supply of grocery stores in England as compared to Scotland. Second, we exploit the fact that shoppers within England were affected differentially by TCFP depending on their precise location with respect to Town Centres. Due to the nature of TCFP, we expect that consumers close to central locations would experience larger decreases in travel costs as supply of grocery stores increased post-1996 with respect to out-of-town locations. The results confirm this prediction. Given that most locations and population are located outside Town Centres, our findings suggest that, by restricting new retail units to Town Centres, TCFP prevented larger savings in shopping travel costs through the development of out-of-town retail.