What Determines the Number of New Homes Built?
What Determines the Number of New Homes Built?
Chapter 6 discusses new house building and the changing structure of the industry. Current housing policy is heavily concerned with ways of increasing supply and, in terms of analysis, the responsiveness of construction to changes in house prices is one of the key parameters. If the response is strong, then increases in demand are primarily met by an increase in supply. If the response is weak then demand increases lead to worsening affordability. The response appears to be particularly weak in the UK by international standards. However, the chapter also demonstrates, through simulations, the extent to which it is feasible to improve affordability by increases in house building. To have a significant impact, increases have to be large and sustained, on a scale that has rarely been achieved in the UK in the past.
Keywords: House building, Construction, Supply elasticity, House prices, Simulations
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