Putting Planning Regulation in Perspective
What are the implications of this discussion for understanding relationships between planning and the housing market? Firstly, thought experiments (as well as historical experience) in which planning is absent and the market prevails show that other factors operate to constrain the rate of new land and housing development. These include the individual motivations of landowners and developers, and the high costs of transactions between actors who must negotiate around individual and collective property rights. Whilst the level of government control over property and development rights differs between jurisdictions, planning regulation is generally accepted as the most efficient mechanism for managing the problem of externalities and public goods. A form of voluntary private cooperation, and the use of legal mechanisms such as leasehold tenure and restrictive covenants, may go some way towards enabling the public good benefits of planning to be achieved in another way. But on the whole it is argued (e.g. Needham 2006) that public planning is a more effective general solution to these problems.
However, as illuminated here, the differential costs and benefits of regulation—ranging from the procedural burden through to the impact of stringent development controls—as well as the differential beneficiaries of particular regulatory settings—remain important considerations in analysing outcomes of planning intervention.
This is not to say that government intervention through a regulated land use planning system will deliver optimum certainty of outcomes either. The assumption of a wise, impartial, well-informed planner always making optimal decisions for the future is somewhat implausible. Alan Evans (2004) cites a study in which planners appeared bemused by the fact that residential development did not proceed in line with their plan but rather followed market forces:
“the planners seemed surprised that land owners, even builders, exercised
no independence but merely responded to demand.” (Evans 2004, p. 6)
The distinction between ‘need’ and ‘demand’ is a long-standing issue in assessing future housing requirements, whilst the difference between allocating land and seeing it actually built out is important in understanding and modelling the operation of the system (Bramley et al. 1995, Bramley and Watkins 2014a).
In summary, under a mixed system of government and market intervention, the individual motivations of all actors matter. Indeed the motivations of landowners and developers in particular, and their reactions to particular planning settings under different conditions, are important and under-researched. Even without planning intervention these actors would respond to the market according to their own motivations. This would not necessarily lead to the market delivering new housing supply in response to demand in a way that supports an optimal market equilibrium.
Property rights influence these motivations and decisions to a large degree. Well-defined and enforceable property rights incentivise investment in land and provide a basis for internalising many of the costs and benefits associated with development. However, the transaction costs associated with managing externalities are too high to replace systems of regulation. Further, under a fully privatised system public goods will be undersupplied. Planning intervention seeks to correct market failures arising from these problems, but the results of this intervention may lead to new forms of failure. Therefore, it is important to scrutinise the procedural costs associated with the planning system, and to examine the potential for vested interests to manipulate rules in their favour.