Land-Use Planning, Land Supply, and House Prices

Abstract

There are clearly significant social benefits to land-use planning, but there may also be significant private and social costs which need to be taken into account. In this paper we explore the relationship between land-use planning, the supply of housing land, and the supply and price of housing. It is based on two pieces of empirical research. In the first study, an investigation was conducted of the extent to which land supply, and particularly the operation of the planning system, had affected house prices in Britain during the 1980s, and how far planning had placed a constraint on land supply or simply reorganised that supply. In the follow-up study a single planning area was looked at to examine the extent to which increased land allocations in one area can compensate for constraints on land supply in another. We conclude that the planning system imposes significant costs, which include the exacerbation of price increases in periods of economic growth, but without being able to generate higher housing output during recession. In addition the planning system tends to foster a narrower range of housing types and densities than would be expected in its absence, and so restricts the choice available to consumers.