Mastering the metropolis through research and thought leadership.
Working Papers

Is There a Supply Side to Urban Revival?

Working paper #453
Joseph Gyourko and Albert Saiz

There are economically large differences in construction costs across U.S. housing markets. This has important implications for urban revitalization because it is not low house prices per se that curb investment and redevelopment, but prices that are low relative to construction costs. Cost differences across markets are not due to an upwardly sloping supply for physical structure, as we estimate it to be highly elastic. Factors that explain differences in building costs include the extent of unionization within the construction sector, local wages, density, and public spending on regulatory enforcement. Costs are also systematically higher in the Northeast and West census regions. While real costs have declined by 11 percent on average over the past 15 years, their variance across markets has increased. Unionization in the construction sector and local wage growth are the most important predictors of recent cost inflation. In areas with large fractions of homes with prices close to replacement value, the evolution of construction costs in particular and supply side conditions more generally could be critical to their future viability as urbanized places.

Download full paper · 1MB PDF

In This Section
Explore Topics

1010 Affordable Housing Amazon Amenitization Architecture Artificial Intelligence Asia Australia automation Autonomous Vehicles bonds Borrowing Constraints Brexit California Canada Capital Business China Co-Working Environment coastal markets cold storage Colombia Commercial Brokerage Commercial Real Estate commissions Congestion consumer bias covid-19 CRE credit card market Credit Default Swaps Credit Insurance Credit Risk Transfers Culture Data Analytics data centers Data Collection Technology Debt Market Demand Demographics Density Development Discrete Choice disruption Diversity drones e-Commerce Economic Corridors economic policy economics education election studies Equity Funds Equity Market Ethnic Factors Europe Fannie Mae financial asset management Foreclosures Foreign Policy France Freddie Mac general equilibrium Global global economy Global Financial Crisis Globalization great depression Great Recession healthy buildings Hedonic hospitality Housing & Residential housing boom Housing Disease housing prices Housing Supply Identity Income Inequality India inflation Inter-generational mobility interest rates Investing jobs labor market Lagging Regions land use regulation Language life sciences Macroeconomics malls Market Pricing megacities Microeconomics Migration Minimum Payments Mixed-Use Mobility moral hazard mortgage insurance mortgage market Mortgage Rates Mortgages Multi-family Nation Building Non-Traditional Mortgages Office Market office sector pension funds Placed Based Policies Political Risk Price Discovery Private Equity Business public health public policy Public Schools real estate brokerage Real Estate Investment Real Estate Investment Trusts Recession Rental Retail Retirement reverse mortgages Risk Adjustment risk management risk-shifting robotics single family housing Slums Sorting South America Spatial Regions spillover effect stimulus package Sub-Prime Mortgages Supply Chains Sustainability Technology telecommunications trade transportation unemployment United States Urban Urbanization Warehouse welfare work from home