Housebuilding, demographic change and affordability as outcomes of local planning decisions: Exploring interactions using a sub-regional model of housing markets in England

Abstract

The recent history of planning policy in England leaves the treatment of housing supply in a confused position. Much depends on the analysis of evidence on the current and future need and demand for housing for groups of inter-related localities. Arguably the most appropriate spatial scale of analysis of market adjustment processes is the functional urban sub-region, and this article discusses the development and application of an economic market model at this level, applied to c. 100 functional housing market areas across England. This goes beyond most previous analyses of UK housing markets, which have lacked explicit treatment of land-use planning and the supply process, while also recognising the economic and supply influences on demographic change. Based mainly on short-medium panel datasets and some micro surveys, component models for migration, household formation, prices, rents, and new construction are estimated and combined with simpler labour market and demographic accounting to build a simulation model which can explore the potential impacts of economic, demographic and planning policy scenarios. Through a range of examples applied to groupings of sub-regions, and two local case studies, this paper focuses on the way housebuilding, demographics and markets adjust to local decisions and the implications of this ‘outcome-oriented’ approach for planning. The results confirm a wider literature in showing that planning restriction raises housing costs, but underlines that the effects are quite gradual, particularly given the rather partial response of new housebuilding itself to planning decisions. They also show the interdependence between nearby sub-regions, and the likely adverse effects of leaving decisions to the local level, as well as the somewhat mixed impact of different levels of economic growth.