Why delay? Understanding the construction lag, aka the build out rate

We explore the determinants of the speed of residential development after dwelling construction starts. Using a sample of over 140,000 residential developments in England from 1996 to 2015 and employing an instrumental variable- and fixed effects-strategy, we find that positive local demand shocks reduce the construction duration in a location with average supply constraints and developer local market power. However, this reduction is less pronounced in areas (i) where local planning is more restrictive, (ii) that are more built-up, and (iii) where competition in the local development sector is lower. We provide a model that rationalises these results. Our findings imply that the slow build out rate in England is the consequence of both market and policy failures.