Working Paper

Recent European research on the spatial distribution of social classes and social segregation and on the effect of planning restrictions on housing prices and housing supply raise issues that go back to the "political economy" debates of the 1970s on the theory of urban rents and land allocation and the quest for a realistic alternative to the dominant neo-neoclassical urban models. The paper takes up an older proposal for a model based on Chamberlin's theory of monopolistic competition and expands it in order to incorporate multiple social classes and real housing markets. The implications of the model indicate that class allocation-segregation research may gain by placing land-use structures and spatial competition via housing at the centre of explanatory mechanisms. Comparing the model with some influential econometric studies of the effects of planning constraints indicates that their results may have been misleading and misinterpreted.