Estimating Housing Supply Elasticity – A Tale of Two Approaches

Housing supply elasticity (HSE) has wide-ranging impacts on urban development and economic dynamics. By applying two well-established approaches to HSE estimation, we show for the first time that: (1) HSE estimates can be robust to omission of some common determinants, such as flat land availability and proximity to the city centre; (2) the two approaches often yield conflicting conclusions regarding which locations are more elastic; (3) importantly, adding a distinct determinant -weakly correlated with other determinants and related to land ownership- can reconcile these differences, highlighting the need for further research on uncovering previously overlooked HSE determinants.