ABSTRACT
This chapter describes a theoretical model of housing dynamics which includes the basic aspects of supply, demand, demography and finance. The model is used as a tool for analysing the notion of industrial instability, and for designing means to prevent it. Understanding the dynamic changes in the housing market and its stabilisation is becoming increasingly important to the building industry; to planning and municipal authorities and to the public in general. The determination of the conditions, which guarantee the economic feasibility of normal construction strategies, is thus of considerable practical interest. The construction firms may attempt to avoid unprofitable operation by using a simple feedback strategy based on prices. Building industry operated by a sole owner is an idealised model corresponding to a coordinated, monopolistic or centrally planned industry, which can vary the rate of construction to maximise profits. The chapter concludes with optimum management of building industry facing unknown but bounded fluctuations of demand are possible.
