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Recently, a literature has emerged using empirical techniques to study the evolution of international cities over many centuries; however, few studies examine long-run change within cities. Conventional models and concepts are not always appropriate and data issues make long-run neighbourhood analysis particularly problematic. This paper addresses some of these points. First, it discusses why the analysis of long-run urban change is important for modern urban policy and considers the most important concepts. Second, it constructs a novel data set at the micro level, which allows consistent comparisons of London neighbourhoods in 1881 and 2001. Third, the paper models some of the key factors that affected long-run change, including the role of housing. There is evidence that the relative social positions of local urban areas persist over time but, nevertheless, at fine spatial scales, local areas still exhibit change, arising from aggregate population dynamics, from advances in technology, and also from the effects of shocks, such as wars. In general, where small areas are considered, long-run changes are likely to be greater, because individuals are more mobile over short than long distances. Finally, the paper considers the implications for policy. [ABSTRACT FROM AUTHOR]

This introduction to the virtual special issue surveys the development of spatial housing economics from its roots in neoclassical theory, through more recent developments in social interactions modelling, and touching on the role of institutions, path dependence and economic history. The survey also points to some of the more promising future directions for the subject that are beginning to appear in the literature. The survey covers elements of hedonic models, spatial econometrics, neighbourhood models, housing market areas, housing supply, models of segregation, migration, housing tenure, subnational house price modelling including the so-called ripple effect, and agent-based models. Possible future directions are set in the context of a selection of recent papers that have appeared in Urban Studies. Nevertheless, there are still important gaps in the literature that merit further attention, arising at least partly from emerging policy problems. These include more research on housing and biodiversity, the relationship between housing and civil unrest, the effects of changing age distributions – notably housing for the elderly – and the impact of different international institutional structures. Methodologically, developments in Big Data provide an exciting framework for future work. [ABSTRACT FROM AUTHOR]

A review of the article "Neoliberalism and the City: Or the Failure of Market Fundamentalism" by Mike Berry, which appears in the same issue, is presented.

Much of mainstream economic analysis assumes that markets adjust smoothly, through prices, to changes in economic conditions. However, this is not necessarily the case for local housing markets, whose spatial structures may exhibit persistence, so that conditions may not be those most suited to the requirements of modern-day living. Persistence can arise from the existence of transaction costs. The paper tests the proposition that housing markets in Inner London exhibit a degree of path dependence, through the construction of a three-equation model, and examines the impact of variables constructed for the 19th and early 20th centuries on modern house prices. These include 19th-century social structures, slum clearance programmes and the 1908 underground network. Each is found to be significant. The tests require the construction of novel historical datasets, which are also described in the paper. [ABSTRACT FROM PUBLISHER]

This paper constructs a housing market model to analyse conditions for different generations of households in the UK. Previous policy work has suggested that baby-boomers have benefitted at the expense of younger generations. The model relies on a form of financial accelerator in which existing homeowners reinvest a proportion of the capital gains on moving home. The model is extended to look at homeownership probabilities. It also explains why an increasing share of mortgages has gone to existing owners, despite market liberalisation and securitisation. In addition, the model contributes to the explanation of volatility. [ABSTRACT FROM PUBLISHER]

This study is concerned with two issues: first, the factors that determine the local location decisions of migrants within the UK and, second, the impact of migrant communities on domestic housing markets. Most migration studies are concerned with the determinants of international migration to the UK. Few look at the drivers of the spatial distributions once migrants arrive. However, migrant housing is primarily a local, urban problem and, arguably, the main issue is the spatial concentrations, rather than absolute numbers. The UK has experienced waves of migrants throughout its history and these are well documented in the censuses since the mid 19th century. A feature of the study is its long-run perspective, which allows the examination of the characteristics of the different waves and shows the high degree of persistence in spatial structures. The second part of the study examines why there is little evidence that migration has much effect on house prices, despite the popular perception that the impact is important. The study demonstrates that the nature of housing market adjustment is more complex than price indicators alone would suggest. Adjustment also takes place through changes to household formation and through the mobility of domestic residents, which mitigate the price effects. [ABSTRACT FROM AUTHOR]

This paper considers the impact of existing land use patterns on housing supply price elasticities in local areas of England, under existing planning policies. The paper demonstrates that, despite common national planning policies, local supply responses to market pressures vary considerably, because of differences in historical land uses. The study area covers the Thames Gateway and Thames Valley, which lie to the east and west of London respectively. However, whereas the latter is one of the wealthiest areas of England, the former includes some of the highest pockets of deprivation and was a government priority area for increasing housing supply. Due to differences in historical land use and geography, the price elasticity in the least constrained area is approximately six times higher than the most constrained. [ABSTRACT FROM PUBLISHER]

As a result of the recommendations of the Barker Review of Housing Supply in 2004, the Department of Communities and Local Government in England commissioned the construction of an econometric model of regional housing markets in order to examine the effects of different levels of housing construction on long-run affordability. The model has been regularly used as part of the policy-making process in England. The paper describes the structure of the model, which includes sectors covering house prices, household formation, tenure, migration flows, demographics and labour markets. Furthermore, through simulation analysis, the paper examines some of the key policy questions that have occurred in UK housing in recent years. [ABSTRACT FROM AUTHOR]

Unsurprisingly, a great deal of attention has been paid to the economic consequences of the credit crunch. However, this paper shows that the credit crunch was preceded by a strong build-up of mortgage debt internationally, which, in the long run, could turn out to be more significant than the credit crunch itself. Indeed, the debt build-up suggests that the credit crunch is more likely to reoccur, because highly-indebted households have weaker buffers to withstand unexpected shocks to their incomes or to interest rates. The paper presents a model that can explain the debt build-up and changes to the distribution of debt between existing owners and first-time buyers, which hinders access to home-ownership for the latter, even amongst those households who would be considered as credit-worthy. [ABSTRACT FROM AUTHOR]

This paper considers how local areas become stuck in poverty traps and develops models exhibiting thresholds, where deprivation has to fall to a certain level before taking off. Using aggregate data for local authorities, the paper models cross-section movements of house prices to identify the threshold level of poverty. The paper argues that the resource requirements for bringing the most deprived areas to the take-off point are likely to be high. But for areas that are already close to the threshold, regeneration can be successful. Therefore, identifying the thresholds is important. Testing for thresholds is not straightforward, but the paper provides empirical evidence. The implications for policies concerned with social mixing are not encouraging. However, mixing may be more successful in areas that lie close to the threshold. For example, few high-income households want to live in the most deprived areas if the expected capital gains are low. But capital gains are maximised close to the take-off points. [ABSTRACT FROM AUTHOR]

In the mid 1990s, Meen set out a series of propositions concerning the relationship between housing and the macro economy during the 1980s and early 1990s. This paper provides 10 further propositions for the early years of this century, taking into account recent research and policy concerns. The first five propositions concern housing market risk, whereas the remaining issues deal with the sustainability of homeownership. The empirical evidence presented finds that there is limited evidence for bubbles over the past 10 years and models of house prices are stable. Furthermore, housing possessions are unlikely to fall to the levels observed in the early 1980s. It is also suggested that the private rental market may not expand at the same rate as in the past 10 years, but there are risks to homeowners down the income distribution. Finally, the main beneficiaries of new affordability targets may be existing rather than new households. [ABSTRACT FROM AUTHOR]

The Barker Review of Housing Supply recommended the greater use of market indicators as the basis for providing sufficient land for future housing requirements. Worsening affordability would be a sign that more land is required. However, the traditional approach to land release used by planners is based on trend household projections. The paper shows that this will typically lead to worsening affordability over time. The paper, therefore, develops an alternative economic model more suitable to the post-Barker era, covering both household formation and tenure choice. The model is used to analyse a range of policy issues, including raising home-ownership rates and home-ownership sustainability. [ABSTRACT FROM AUTHOR]

Many governments have introduced policies aimed at improving social mix, particularly in urban areas. In this article we develop a model of moving and location decisions, which demonstrates how cumulative processes of growth, decline and segregation occur that conflict with the aims of policies aimed at improving social mix. A nested multinomial logit model is estimated, using a micro data set for London and South East England to illustrate the likely outcomes. [ABSTRACT FROM AUTHOR]

The Barker Review of Housing Supply was set up in order to address some of the weaknesses that might arise if the UK were to join EMU. The Final Report has quickly become one of the most important documents in housing policy for many years. Broadly, the Review examined the reasons for the weakness of English housing supply. For example, during the 1990s, despite the boom in house prices, private housing construction hardly grew at all. The weakness of supply is one reason why house prices in the UK have risen much faster than the European average. In response to the Review's conclusion that the land-use planning system is the main cause of supply shortages, England will be introducing affordability targets. Regional planning authorities will be required to release more land if they expect targets not to be met. Economic analysis and models will become central to the assessment. The Barker Review provides a good example of how economic analysis can be used to inform the policy debate. This paper looks at the economics underlying the Barker Review, concentrating on an analysis of supply elasticities and the required increases in construction to meet price targets. The latter has been particularly controversial since, under some assumptions, the analysis implies that housing construction in England needs to be approximately doubled in order to bring house price inflation down to European levels. [ABSTRACT FROM AUTHOR]

In this article, Geoff Meen discusses patterns of economic segregation in England. Despite the emphasis that the government places on reducing segregation, patterns have, in fact, remained remarkably constant over, at least, the last twenty years. Dynamic changes in housing markets and migration over time help to explain these patterns, and evidence is presented on the extent to which house prices in certain local authorities have been under- or over-valued. The analysis also shows that, at the local level, housing markets exhibit non-linear behaviour, which hinders the effectiveness of housing policy in the most deprived areas and adds to economic segregation. [ABSTRACT FROM AUTHOR]

This paper considers how empirical models of urban housing markets might be constructed as a basis for policy analysis. It is suggested that this is fundamentally more difficult than national or regional models, because of particular characteristics of urban markets--notably, the importance of social interactions, non-linearity and segregation. However, recent advances in the modelling of social interactions point to a possible way forward. The paper begins by reviewing some aspects of this literature and shows how the models generate non-linearities consistent with recent work on thresholds in local housing markets. Simple cellular automata are also used to demonstrate this point and how segregation may arise. A review follows of work on discrete choice models, which include social interactions within their structure. Bringing all the tools together, it is suggested that there is now the potential to construct urban housing models, although a great deal of theoretical and empirical work remains to be done. [ABSTRACT FROM AUTHOR]

This paper considers how empirical models of urban housing markets might be constructed as a basis for policy analysis. It is suggested that this is fundamentally more difficult than national or regional models, because of particular characteristics of urban markets-notably, the importance of social interactions, non-linearity and segregation. However, recent advances in the modelling of social interactions point to a possible way forward. The paper begins by reviewing some aspects of this literature and shows how the models generate non-linearities consistent with recent work on thresholds in local housing markets. Simple cellular automata are also used to demonstrate this point and how segregation may arise. A review follows of work on discrete choice models, which include social interactions within their structure. Bringing all the tools together, it is suggested that there is now the potential to construct urban housing models, although a great deal of theoretical and empirical work remains to be done. [ABSTRACT FROM PUBLISHER]

This paper constitutes the first of two interrelated studies and is concerned with the relationship between house prices and transactions. Using aggregate time–series data, we find a strong relationship in Britain between the two variables, but the relationship changed during the 1990s. Transactions became much lower. We suggest that structural changes in macroeconomic relationships are increasingly likely to occur in a world of greater inequality and our results are one symptom. We argue that macroeconomic estimation needs to be complemented by careful microeconomic analysis. The second study, also appearing in this issue, therefore examines the microeconomic aspects of the issue. [ABSTRACT FROM AUTHOR]

In this second of two related papers in this issue, the causes of declining levels of housing transactions in Britain during the 1990s are explored. The lower transaction levels resulted partly from the changing behavior of young individuals. Both household formation and owner–occupation rates of these groups also fell sharply. Using panel data, we investigate the causes of reduced new household formation and owner–occupation, finding that changes in the income distribution away from young cohorts have been an important factor. [ABSTRACT FROM AUTHOR]

Most empirical analysis of property development treats the subcomponents of the construction industry as independent. For example, models of housing construction typically do not consider any relationship with industrial or commercial construction. In fact, there are a number of ways in which changes over time may be interdependent. For example, economic theory suggests that, under some conditions, housing investment crowds out industrial and commercial investment. In general, therefore, if there are interdependencies, the presumption is that the relationship is negative. Here the relationship between new housing and industrial construction is concentrated on. It is found that, in the long run, based on Johansen tests for Britain since the sixties, the relationship is positive – movements are complementary. At first sight, this result is counter-intuitive, at least in an aspatial setting. But, in a spatial setting, the results are consistent with the view that (i) 'jobs move to workers' as relocating firms seek out highly skilled workers who, in turn, search for high quality housing locations; (ii) particularly in SE England, which has a high rate of new firm formation, fast growing new firms are started by high potential entrepreneurs close to where they live. Therefore, new housing and industrial development are self-reinforcing. [ABSTRACT FROM AUTHOR]

1999 saw the return of large scale mortgage equity - ie mortgage borrowing to finance consumption rather than house purchase - for the first time for a decade. Recent developments of the OEF macroeconometric model of the UK economy have focused on the determination of mortgage lending, looking in particular at the impact of downpayment constraints - ie the deposit borrowers have to put down when they buy a house. In this article, Geoffrey Meen uses this model to analyse the effects of mortgages on: (i) the cycle in the UK housing market at a national level; (ii) regional house price differentials; and (iii) aggregate savings and consumer behaviour. [ABSTRACT FROM AUTHOR]

Examines issues related to housing economics in Great Britain. Creation of a model of housing market; Components of the housing market model; Use of the model in assessing housing market efficiency; Relationship between house prices and property transactions; Role of monetary policy in the generation of housing cycles and stability.

Examines the aggregate housing market implications of labor market change in Great Britain. Structural change and the nature of labor and credit market constraints; Nature of aggregation conditions; Aggregate structural change in national house prices in the 1990s; Labor market change and post-1990 house prices.

In Britain, house prices exhibit a distinct spatial pattern over time, rising first in a cyclical upswing in the south-east and, then, spreading out over the rest of the country. This is known as the ripple effect. Although previous studies have shown that, statistically, the ripple effect is a valid representation of the data, providing convincing economic explanations is less straightforward. Some studies have concentrated on the role of migration; others argue that the pattern reflects different regional growth rates. This paper suggests that structural differences in regional housing markets are important. A new model of house prices for the regions in Great Britain is devised and estimated in which the coefficients exhibit non-random spatial patterns. The coefficients reflect structural differences between the regions and it is shown, through simulations, that the model can generate a ripple effect irrespective of regional growth patterns. [ABSTRACT FROM AUTHOR]

According to recent official projections, 4.4 million new households will be formed in England between 1991 and 2016. These estimates are based on a detailed analysis of demographic trends, but take no account of the effect of potential changes in economic conditions, particularly on the owner-occupancy rate. In this paper, we propose a new approach to modelling sustainable owner-occupancy which places less emphasis on demographics, but considers in more detail the role of market mechanisms through changes in house prices and rates of new construction. [ABSTRACT FROM AUTHOR]

According to recent official projections, 4.4 million new households will be formed in England between 1991 and 2016. These estimates are based on a detailed analysis of demographic trends, but take no account of the effect of potential changes in economic conditions, particularly on the owner-occupancy rate. In this paper, we propose a new approach to modelling sustainable owner-occupancy which places less emphasis on demographics, but considers in more detail the role of market mechanisms through changes in house prices and rates of new construction. [ABSTRACT FROM PUBLISHER]

Presents a study that aimed to measure mortgage market rationing directly without the use of proxy measures and methods in estimating demand and supply functions for markets in disequilibrium. Changes that have taken place in the mortgage market of Great Britain; Effects for personal sector housing and consumption decisions; Description of a proposed method of measuring rationing which incorporates regime switching.

Examines the process of structural adjustment in Europe following the establishment of the Exchange Rate Mechanism. Properties of the Oxford Economic Forecasting (OEF) world model; Determination of the structural adjustment within the OEF model; Differences in the adjustment process between Great Britain and other European countries.

The article examines the effects of mortgage rationing on the level of housing demand and house prices in Great Britain. It derives the housing user cost of capital in the absence of credit market constraints. The article also discusses how inflation affects house prices. The effects of a change in the inflation rate on the mortgage market and nominal interest rates are examined. The article specifies a model to determine real house prices and results are presented.

Explores the nature of spatial interactions in Great Britain regional house prices and housing starts using methods taken from the spatial econometrics literature and from cointegration. Extent to which markets are homogeneous, dependent and convergent across the English regions; Spatial dependence in terms of house prices and starts; Housing since the early 1970s.

During the last ten years, macroeconomists have increasingly come to realise that there are important interactions between housing and the wider economy. In some cases, this realisation has come too late to avoid the severe oscillations in the economy that have characterised the period since the mid-1980s. This paper uses a macroeconometric model, specifically designed to capture the interactions, in order to reflect on the experience of the 1980s and early 1990s and to draw theoretical, empirical and policy conclusions in terms of ten propositions. [ABSTRACT FROM AUTHOR]

During the last ten years, macroeconomists have increasingly come to realise that there are important interactions between housing and the wider economy. In some cases, this realisation has come too late to avoid the severe oscillations in the economy that have characterised the period since the mid-1980s. This paper uses a macroeconometric model, specifically designed to capture the interactions, in order to reflect on the experience of the 1980s and early 1990s and to draw theoretical, empirical and policy conclusions in terms of ten propositions. [ABSTRACT FROM PUBLISHER]

The UK mortgage market has undergone important structural changes in recent years. A consequence has been that households are no longer generally subject to mortgage rationing. In this paper we examine some of the results of this change for the housing market. We first construct a simple theoretical model of the housing and mortgage markets and show, as an illustration of the effect of exogenous changes in general, how mortgage tax relief abolition would have different results under alternative regimes. We then quantify these results using a fully estimated model. [ABSTRACT FROM PUBLISHER]