Housing prices, costs and policy: the housing supply equation in Ireland since 1970

Abstract

This article examines the responsiveness of new housing supply to prices and costs, using the case of Ireland at quarterly frequency from the 1970s, as well as a county-level panel from the 1990s. Across four error-correction specifications, and supported by an instrumental variables approach, we find the estimated elasticity of new housing supply to prices of +0.9 in the baseline, while that of costs is larger in magnitude (−1.9). We present evidence that responsiveness to prices rose after the 1980s, then fell in the 2000s, before rising again and also that elasticities vary at the county level.