Is Accra a Superstar City?

A recent study of house price behavior
in U.S. cities by Gyourko, Mayer, and Sinai (2006) raises
questions about so-called superstar cities in which housing
is so inelastically supplied that it becomes unaffordable,
as higher-income families outbid residents. We consider the
case of Accra, Ghana, in this light, estimating the
elasticity of housing supply and discussing the implications
for growth and income distribution. There is not a great
deal of data available to examine trends in Accra, so our
method is indirect. First, we use a variant of the
traditional monocentric city model to calculate the
elasticity of Accra's housing supply relative to those
of other similarly-sized African cities. This suggests that
housing supply responsiveness is much higher elsewhere.
This muted supply responsiveness is consistent with the
observed higher housing prices. Second, we estimate a
number of traditional housing demand equations and reduced
form equations. Placing a number of restrictions on the
equations allows us to infer Accra's housing supply
elasticity. Taken together, our approaches suggest that
lower-income families in Accra have such poor housing
conditions because the market is extremely unresponsive to
demand. Although the outcomes we have traced-high housing
prices and low quality-are not unusual relative to the other
developed country superstar cities, they are extreme. The
welfare costs are considerable, so much so that in addition
to direct housing market effects, these policies also appear
to have potentially significant implications for the
achievement of more equitable growth.