Spatial Patterns of Development and the British Housing Market

Posted: 2 Jul 2008

See all articles by Timothy Leunig

Timothy Leunig

London School of Economics & Political Science (LSE) - Department of Economic History

Henry G. Overman

London School of Economics (LSE) - Department of Geography and Environment; Centre for Economic Policy Research (CEPR)

Date Written: spring 2008

Abstract

The government wants 3m houses built by 2020. Economic theory tells us their locations matter for living standards. Economics cannot tell us the optimal locations, but does show that houses are usually socially more valuable in high land-price areas, because additional workers are more productive in such places. Land-price data and evidence on urban agglomeration economies point to a significant rise in the optimal sizes of some UK cities and that optimal locations have moved from industrial-revolution cities towards the South-east. As a result, significantly expanding London, its commuter satellites, and other high-skill places in the UK, but particularly in the South-east, is likely to generate substantial rises in wages and living standards. In these places the planning system dramatically constrains the economy from responding with nineteenth-century dynamism, when new economic opportunities led some towns to grow dramatically.

Keywords: agglomeration economies, housing location, market potential, migration, spatial economics, urban economics

JEL Classification: R12, R31, R52

Suggested Citation

Leunig, Timothy and Overman, Henry G., Spatial Patterns of Development and the British Housing Market (spring 2008). Oxford Review of Economic Policy, Vol. 24, Issue 1, pp. 59-78, 2008, Available at SSRN: https://ssrn.com/abstract=1154418 or http://dx.doi.org/grn004

Timothy Leunig (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economic History ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Henry G. Overman

London School of Economics (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 20 7955 6581 (Phone)
+44 20 7955 7412 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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