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Position:

Reader (Associate Professor) in Economic Geography and
Director of the MSc in Real Estate and Finance at the London School of Economics

Research interests:

Urban and real estate economics: location choice; homeownership; housing supply and land use regulations; house price capitalization; social capital investment; education; local public finance

Contact details:

Address: London School of Economics, Department of Geography and Environment, Houghton Street, London WC2A 2AE, UK
Email: c.hilber@lse.ac.uk
LSE Room: S418a

PUBLICATIONS (see under WORKING PAPERS for Discussion Paper versions of published articles)

Articles in English

"Capitalization of Central Government Grants into Local House Prices: Panel Data Evidence from England," with Teemu Lyytikainen and Wouter Vermeulen, Regional Science and Urban Economics, 2011, Vol. 41, No. 4, 394-406.

"New Housing Supply and the Dilution of Social Capital," Journal of Urban Economics, 2010, Vol. 67, No. 3, 419-437.

"Agglomeration Economies and the Location of Foreign Direct Investment: Empirical Evidence from Romania," with Ioan Voicu, Regional Studies, 2010, Vol. 44, No. 3, 355-371.

"Why Do Households Without Children Support Local Public Schools? Linking House Price Capitalization to School Spending," with Christopher Mayer, Journal of Urban Economics, 2009, Vol. 65, No. 1, 74-90.

(Supplementary material associated with this article can be found, in the online version, at doi: 10.1016/j.jue.2008.09.001)

"Office Space Supply Restrictions in Britain: The Political Economy of Market Revenge," with Paul Cheshire, Economic Journal, 2008, Vol. 118, Issue 529, F185-F221.

"Explaining the Black-White Homeownership Gap: The Role of Own Wealth, Parental Externalities and Locational Preferences," with Yingchun Liu, Journal of Housing Economics, 2008, Vol. 17, No. 2, 152-174.

"An Empirical Test of the Theory of Sales: Do Household Storage Constraints Affect Consumer and Store Behavior?," with David Bell, Quantitative Marketing and Economics, 2006, Vol. 4, No. 2, 87-117. (lead article)

"Neighborhood Externality Risk and the Homeownership Status of Properties," Journal of Urban Economics, 2005, Vol. 57, No. 2, 213-241. (lead article)

"School Funding Equalization and Residential Location for the Young and the Elderly," with Christopher J. Mayer, Brookings-Wharton Papers on Urban Affairs 2004, Issue 5, 107-148. (ISSN 1528-7084)

Articles in German

"Der Einfluss von Preisaenderungen auf Angebot und Nachfrage von Immobilien: Theorie, empirische Evidenz und Implikationen," Zeitschrift fuer Immobilienoekonomie (German Journal of Property Research), Issue 1/2007, 5-20. (lead article; with extended English abstract) (The Impact of Price Changes on the Supply and Demand of Properties: Theory, Empirical Evidence, and Implications)

"Die unsichtbare Umverteilung: Beeinflussung der Bodenpreise durch staatliche Taetigkeit," DISP, 1997, No. 129, 10-15. (The Invisible Redistribution: The Influence of Governmental Activities on Land Values.)

"Chancen und Probleme eines europaeischen Emissionszertifikatehandels im Flugverkehr," Jahrbuch der Schweizerischen Verkehrswirtschaft, 1996, Vol. 95/96, 43-54. (Opportunities and Problems of an Emission Trading System for Air Traffic in Europe.)

Handbook Chapters (in German)

"Preistheorie: Einfluss von Preisaenderungen auf Angebot und Nachfrage von Immobilien," In Karl-Werner Schulte (Editor), Immobilienoekonomie (4. Band: Volkswirtschaftliche Grundlagen), 2008. Munich: Oldenbourg. (Price Theory: Impact of Price Changes on Property Supply and Demand)

Books (in German)

"Standortattraktivitaet, Liegenschaftspreise und Mieten," WWZ Forschungsbericht 4/99, 1999. (Attractiveness of Locations, Property Values, and Rents. Research Report.

"Auswirkungen staatlicher Massnahmen auf die Bodenpreise: Eine theoretische und empirische Analyse der Kapitalisierung," Zuerich: Ruegger, 1998. (Effects of Governmental Measures on Land Values: A Theoretical and Empirical Analysis of Capitalization. Ph.D. Dissertation.)

"Innovatives Management staatlicher Umweltpolitik: New Public Environmental Management," Basel: Birkhaeuser, with Stefan Schaltegger, Ruedi Kubat, and Stefan Vaterlaus, 1996. (Innovative Management of Environmental Policy: New Public Environmental Management.)

Book Reviews

"Tullock, Gordon (1994): The New Federalist," Kyklos, Vol. 50, No. 3, 445-446, 1997.

Government Reports & Reports for Official Government Reviews

"The Impact of Restricting Housing Supply on House Prices and Affordability" Final Report. Department for Communities and Local Government, November 2010. (joint with Wouter Vermeulen)

"The Cost of Regulatory Constraints on the British Office Market" prepared for the Barker Review of Land Use Planning, 15 May 2006. (joint with Paul Cheshire)

Other Reports

"The Effects of Supply Constraints on Housing Costs: Empirical Evidence for England and Assessment of Policy Implications" Final Report for the National Housing and Planning Advice Unit (NHPAU), July 2010. (joint with Wouter Vermeulen)

"The Effects of Supply Constraints on Housing Costs: Empirical Evidence for England and Assessment of Policy Implications" Interim Report for the National Housing and Planning Advice Unit (NHPAU), September 2008. (joint with Wouter Vermeulen)

"Education Reforms and Household Mobility" Final Report for Columbia-LSE Alliance Collaborative Research Fund Seed Grant, January 2008. (joint with Christopher J. Mayer)

WORKING PAPERS

Papers not yet published

"The mortgage interest deduction and its impact on homeownership decisions," with Tracy M. Turner, November, 2011, mimeo, London School of Economics. (Revise and Resubmit; Resubmitted)

This paper examines the impact of the combined U.S. state and federal mortgage interest deduction (MID) on homeownership attainment, using data from 1984 to 2007 and exploiting variation in the subsidy arising from changes in the MID within and across states over time. We test whether capitalization of the MID into house prices offsets the positive effect on homeownership. We find that the MID only boosts homeownership attainment of higher income households in less tightly regulated housing markets. In more restrictive places an adverse effect exists. The MID is an ineffective policy to promote homeownership and improve social welfare.

"On the origins of land use regulations: Theory and evidence from US metro areas," with Frederic Robert-Nicoud, October, 2011, mimeo, London School of Economics and University of Geneva. (Under Review)

We model residential land use constraints as the outcome of a political economy game between owners of developed and owners of undeveloped land. Land use constraints benefit the former group (via increasing property prices) but hurt the latter (via increasing development costs). More desirable locations are more developed and, as a consequence of political economy forces, more regulated. Using OLS as well as an IV approach that directly follows from our model we find strong and robust support for our predictions at the US metro area level. We conclude from our analysis that land use regulations are suboptimal.

"The Economic Implications of House Price Capitalization: A Survey of an Emerging Literature," October, 2011, London School of Economics, SERC Discussion Paper No. 91. (paper also available as Lincoln Institute of Land Policy Working Paper)

House price capitalization has long been thought to be a means of testing for efficiency in the local public sector. In this article I argue that the extent of house price capitalization itself may have important economic implications. In doing so I synthesize an emerging literature that explores the conditions under which public and private investments and intergovernmental transfers are capitalized into local house prices and the broader implications of such capitalization. The main insights are: (i) House price capitalization is more pronounced in locations with strict regulatory and/or geographical/physical supply constraints; (ii) capitalization can - under certain conditions - induce the provision of durable local public goods and club goods; and (iii) capitalization effects - which are habitually ignored by policy makers - have important adverse consequences for a wide range of policies such as intergovernmental aid or the mortgage interest deduction.

"Homeownership and Entrepreneurship," with Philippe Bracke and Olmo Silva, May 2011, London School of Economics, mimeo. (first draft; currently under revision)

Previous research has investigated the relation between homeownership and unemployment. However, the link between homeownership and entrepreneurship has remained unexplored. In this paper, we aim at filling this gap. To start with, we use two different data sources - the European Community Household Panel (ECHP) and the British Household Panel Survey (BHPS) - to document a strong positive cross-sectional association between homeownership and various measures of entrepreneurial activities. However, this link might capture spurious effects driven by unobservables. To by-pass this issue, we exploit the longitudinal dimension of the BHPS to construct a detailed monthly-spell dataset that tracks individuals’ job history and tenure choice, coupled with information on people’s time-varying background characteristics. We then use this data to estimate regressions that include individual fixed-effects to partial out time-invariant individual unobservables. Our panel results show that becoming a homeowner significantly reduces the probability of becoming an entrepreneur, and that this effect is much stronger for homeowners with a mortgage. We investigate the robustness of our finding along a number of dimensions and test some possible explanations. Our results suggest that this negative link can be rationalised by the presence of credit constraints in the entrepreneurial decision and portfolio-distortions due to large amounts of individuals’ equity invested in houses.

"The Productivity Costs of Planning for Supermarkets: evidence from a micro dataset," with Paul Cheshire and Ioannis Kaplanis, April 2011, London School of Economics, mimeo. (Under Review)

Few studies conceive of land as a productive factor but British land use policies may lower total factor productivity (TFP) in the retailing industry by (i) restricting the total availability of land for retail, thereby increasing space costs (ii) directly limiting store size and (iii) concentrating retail development on specific central locations. We use unique store-specific data to estimate the impact of space on retail productivity and the specific effects of planning restrictiveness and micromanagement of store locations. We use the quasi natural experiment generated by the variation in planning policies between England, Wales, Scotland and Northern Ireland to isolate the impact of town centre first policies. We find that TFP rises with store size and that planning policy directly reduces productivity both by reducing store sizes and forcing retail onto less productive sites. Our results, while they strictly only apply to the supermarket group whose data we analyse, are likely to be representative of supermarkets in general and suggest that since the late 1980s planning policies have imposed a loss of TFP of some 25%.

Extended Discussion Paper Version: "Evaluating the Effects of Planning Policies on the Retail Sector: or do the Town Centre First Policies Deliver the Goods?, with Paul Cheshire and Ioannis Kaplanis, January 2011,London School of Economics, SERC Discussion Paper No. 66."

"The Long-Term Impact of Supply Constraints on House Prices in England," with Wouter Vermeulen, August, 2010, mimeo, London School of Economics. (currently under revision) (see CLG Report for extended version of paper)

We explore the causal effects of regulatory and physical supply constraints on house prices in England by exploiting a unique panel dataset of 353 local planning authorities ranging from 1974 to 2008. Using exogenous variation from a policy reform, local vote shares and historical density as instruments to identify the endogenous constraints-measures, we find that: i) Regulatory constraints have a very substantive positive long-run impact on house prices; ii) The effect of constraints due to scarcity of developable land is confined to highly urbanized areas; iii) Uneven topography has a quantitatively less meaningful impact; and iv) The effect of supply constraints on the price-earnings-elasticity is greater during boom than bust periods.

"Land Use Regulation and Retail: Space Constraints and Total Factor Productivity," with Paul Cheshire and Ioannis Kaplanis, August, 2010, mimeo, London School of Economics.

"Supply constraints and house price dynamics: Panel data evidence from England," with Wouter Vermeulen, November, 2009, mimeo, London School of Economics. (currently under revision)

We explore the impact of regulatory and physical supply constraints on house price levels and volatility in England. We hypothesize that house prices react more strongly to changes in income in more constrained locations and test this proposition using a unique panel dataset of 353 local authorities, ranging from 1974 to 2008. We use a policy reform and historical density as instruments to identify the endogenous constraints-measures and document that both regulatory and physical constraints have a strong positive causal effect on the long-run impact of income on house prices. Our counterfactual analysis suggests that average house prices in England in 2008 would be 21.4 percent lower if the planning system were completely relaxed. The standard deviation of prices during the sample period would be 29.7 percent lower. House prices (volatility) would be 9.9 (13.1) percent lower absent of scarcity constraints and 2.8 (3.6) percent lower if England were totally flat.

"Local Economic Conditions and the Nature of New Housing Supply," with Jan Rouwendal and Wouter Vermeulen, London School of Economics, mimeo, November 2008. (currently under revision)

We explore the impact of local economic conditions on the type and size of newly constructed housing. A slightly modified standard open monocentric city model predicts that, as long as land use regulation is relatively lax, positive local income shocks cause construction of more multifamily housing and smaller units. Exploiting metro area-level American Housing Survey (AHS) data from 1984 to 2004, we confirm that (i) local economic shocks have the predicted effects, (ii) these effects are confined to metro areas with relatively lax land use regulation, and (iii) the adjustment process appears to be driven by migration (as is assumed in the open monocentric city model). Hence, severe land use controls may hamper metro area labor market adjustment not only through limits on the quantity of newly supplied units, but also by constraining their type to housing that is less suitable for migrants.

"The Determinants of Homeownership across Europe: Panel Data Evidence", December, 2007, London School of Economics, mimeo. (single authored) (currently under revision)

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.

"Homeownership and Land Use Control: A Dynamic Model with Voting and Lobbying," with Frederic Robert-Nicoud, January 2007, Research Papers in Environmental and Spatial Analysis, No 119.

Homeowners have incentives to control and limit local land development and anecdotic evidence suggests that 'homevoters' indeed actively support restrictive measures. Yet, US metro area level homeownership rates are strongly negatively related to corresponding measures of the restrictiveness of land use regulation. To shed light on these seemingly contradictory stylized facts, we present a dynamic model with a planning board that maximizes a weighted social welfare function (SWF). The SWF can be interpreted as the reduced form of various political economy models of voting and lobbying. We consider three special cases: a median voter model, a probabilistic voting model, and an 'influence for sale' model. In all three cases conditions exist that predict outcomes which are consistent with the presented stylized facts. Generally, our model predicts that the homeownership rate has an ambiguous effect on the regulatory restrictiveness.

"Owners of Developed Land versus Owners of Undeveloped Land: Why Land Use is More Constrained in the Bay Area than in Pittsburgh," with Frederic Robert-Nicoud, November, 2006, London School of Economics, CEP Discussion Paper, No. 760.

We model residential land use constraints as the outcome of a political economy game between owners of developed and owners of undeveloped land. Land use constraints are interpreted as shadow taxes that increase the land rent of already developed plots and reduce the amount of new housing developments. In general equilibrium, locations with nicer amenities are more developed and, as a consequence, more regulated. We test our model predictions by geographically matching amenity, land use, and historical Census data to metropolitan area level survey data on regulatory restrictiveness. Following the predictions of the model, we use amenities as instrumental variables and demonstrate that metropolitan areas with better amenities are more developed and more tightly regulated than other areas. Consistent with theory, metropolitan areas that are more regulated also grow more slowly.