Evolution of Research on the Effects of Planning Regulation on the Housing Market
Research interest in relationships between planning and the housing market can be loosely traced to the evolution of late twentieth century urban policy, planning and changing approaches to housing provision. In the early 1970s, the late Sir Peter Hall called attention to the differential impacts of urban containment which he argued had led to rising land and property values in well-located, high-demand areas of the UK (Hall et al. 1973). Later, a series of studies examined the ways in which perceived differences between local planning authorities in their planned allocation of land and/or their propensity to issue permission for residential development, influenced the supply and price of housing in Britain (Cheshire and Leven 1986; Monk et al. 1996; Cheshire and Sheppard 1989; Bramley 1993b).
As regional planning efforts proliferated in the USA over the late 1960s and 1970s (Cullingworth and Caves 2014), there was rising consciousness about the impacts of municipal zoning controls on the supply and price of housing (Dowall 1979). Later, a specific trajectory of research on planning and the housing market in the USA exposed how certain zoning and development controls (such as strict minimum building setbacks, large lots for detached family homes and single use zoning schemes which prevent ‘multi-family’ or medium density residential development) operate in ways which are inherently exclusionary to lower-income and diverse social groups (Ihlanfeldt 2004; Fischel 2004).
As urban containment or ‘growth management’ approaches travelled to the USA towards the later years of the twentieth century, a number of studies sought to examine their implications for housing supply and affordability (Landis 2006; Dawkins and Nelson 2002; Carruthers 2002a), particularly in areas with strong growth controls such as Oregon (Wu and Cho 2007, p. 50); California (Quigley et al. 2004; Neiman and Fernandez 2000; Lewis and Neiman 2000; Gyourko et al. 2008); and Florida (Ihlanfeldt 2007; Anthony 2006; Anthony 2003). Increasing concern over the environmental impact of development on biodiversity values and corresponding enactment of special regulatory protections and procedures also stimulated a specific trajectory of research in the USA (Sims and Schuetz 2009).
In a context of limited funding to service new housing development, many planning authorities have introduced specific developer contribution or impact fees to offset costs. Depending on the availability of other revenue, such contributions can provide an important source of income for local authorities. Such obligations are often portrayed by the housing industry as a ‘tax’ on development, which both deters new construction and increases costs paid by homebuyers. A body of research has thus emerged to examine the extent to which requirements for developers to contribute towards the costs of local roads, paths, parks and community facilities, deter new housing production or increase house prices (Evans-Cowley and Lawhon 2003). However, it may be countered that such fees or taxes create an incentive for local authorities to encourage or not oppose development, and thereby encourage authorities to plan or permit more development than they otherwise would. This effect is reinforced to the extent that the revenues are used to provide good quality infrastructure to support new developments, and thereby create new communities which are more sustainable.
By the turn of the millennium, growth management or urban containment had become a central tenet of urban planning policy in many nations of the world (as noted in Chap. 1), often motivated by aspirations to achieve greater levels of urban ‘sustainability’ (in all senses) (Dempsey 2011b). In nations such as the UK, the Netherlands, Australia and New Zealand, containment policies, as well as the increased regulatory burden associated with environmental assessment requirements, were implicated in growing concern over reduced rates of new housing production relative to historical trends (Altes 2006; Bramley 2007; Murphy 2014; Gurran and Phibbs 2013). At the same time, other significant shifts in the role of the government in housing provision—from direct government delivery through supply-based interventions (funding for public housing) to more diversified and demand side mechanisms intended to support the private market—have also been at play.
So, a number of factors could explain changing rates of housing production over this period. Yet there has been particular interest in the extent to which planning has impeded the capacity for the market to respond to housing demand in jurisdictions characterised by high price inflation. As noted in Chap. 3, the UK government’s inquiry into housing supply (2004) and the planning system (2006) led by economist Kate Barker (Barker 2004; Barker 2006) prompted a series of reforms designed to reduce barriers to housing development, and improve system efficiency, heralding the beginning of a period of almost perpetual change and review (Barker 2008; Gurran et al. 2014). Similar reforms were pursued over the same period by Australia and New Zealand, again in an attempt to address affordability pressures and lacklustre new housing production in both countries (Gurran et al. 2014). Whether these efforts helped lift housing production in the context of wider market drivers and shifts is difficult to determine. The policy debates which have ensued have focussed on system-wide impacts of planning on overall rates of housing production, whereas the empirical research tends to focus on measuring local level impacts arising from planning regulation and constraint.
The rough chronological account of research on planning and housing outlined earlier implies a simple linear relationship between particular regulatory interventions and demonstrable market outcomes. Yet in reality, planning sits within a range of factors influencing urban change and the housing market, including geographic features (slope, water bodies), underlying population growth and household formation, industry, unemployment and income trends, interest rates and inflation, national and local tax rates and allowances, local service quality (e.g. schools) (Cheshire and Sheppard 1995; Haurin and Brasington 1996; Roback 1982), price to rent ratios (as an indicator of returns on housing investment); and the potential value of alternative investments such as the stock market (Otto 2007; Hui and Ho 2003; Malpezzi 2002; Saiz 2010). Within this panoply, planning has a direct effect on the supply of opportunities for housing development, through its functions of land allocation and development control, but it may also indirectly influence it through local economies, transport infrastructure and local amenities.
In theory, these two primary functions—allocating housing sites (through land use zones delimiting allowable uses, or issuing permission for a specific development), and controlling the density and design of new housing—affect both the quantity and cost of new housing production. Yet it is difficult to determine the relative impact of these functions in relation to the many other factors influencing housing production. These include the costs of acquiring land, ‘holding costs’ in servicing loan finance, construction materials and labour, marketing and selling costs, as well as compliance fees and charges. This complexity makes it important to return to the question of how the land and housing market might operate without planning intervention. Such issues were considered briefly in Chap. 1 and we return to them at greater length here.