‘The Best Laid Plans’
____________________
Planning and Economic Growth
[‘No Room! No Room!’ (1987)]
Previous work on housing for Policy Exchange with Oliver
Hartwich:-
Unaffordable Housing: Fables and Myths – February 2005
(Thinktank Publication of the Year, 2005)
Bigger Better Faster More: Why Some Countries Plan Better Than
Others – June 2005
Better Homes Greener Cities – February 2006
British homes are smaller than those in other countries in
Western Europe (except Portugal, Greece, and Finland)
New homes in the UK are, without exception, the smallest in
Western Europe
The average density in Germany is about the same as in the
UK- new homes are cheaper and substantially larger.
(Richard Rogers thought that this was because they had better
architects!)
COMPARISON OF DWELLING SIZES
Newly built dwellings
Floor space (m2)
Number of rooms
Room size (m2)
UK
76
4.8
15.8
Italy
81.5
3.8
21.4
Portugal
82.2
4.7
17.5
Sweden
83
4
20.8
Finland
87.1
4
21.8
Ireland
87.7
5.2
16.9
Austria
96
3.7
25.9
Spain
96.6
5.1
18.9
Luxembourg
104.1
5.1
20.4
Germany
109.2
5.1
21.4
France
112.8
4.2
26.9
Netherlands
115.5
4.1
28.2
119
5.8
20.5
126.4
3.2
39.5
137
3.5
39.1
Belgium
Greece
Denmark
The effect is redistributive and divisive
-the haves versus the have-nots
-the old versus the young
The Policy of Constraint –
The Effect on Commerce and Industry
Remember – it was not planned
It was planned that there would be sufficient land through
‘New Towns’, regional policy, etc
The Green Belts simply prevented wasteful sprawl
The predictions on which the plans were based were wrong,
and so the plans were wrong
‘The containment of urban England’ was evident by the early
seventies
Planners and government denied until 1992 that the policy of
constraint affected prices.
A misunderstanding of Ricardian rent theory.
So now government accepts that constraints on land
availability increase house prices. (Or does it?)
But planners (and politicians) don’t think economically – the
Rogers Report had virtually no economic input and was
economically illiterate.
‘It’s up to planners to plan and the market to follow’
But what if the best land use plan results in a sub-optimal
economy?
Table 1: Land value for different uses in the regions
Region
North East
North West
Yorkshire/Humberside
East Midlands
West Midlands
Eastern
South East
South West
Wales
England & Wales*
London
(*excluding London)
Mixed agricultural
land, £/ha
6,701
9,633
9,159
7,595
11,945
7,739
11,787
10,416
9,774
10,023
n/a
Land for residential
use, £/ha
2,210,000
2,740,000
2,330,000
2,060,000
2,200,000
3,615,000
3,240,000
2,340,000
2,270,000
2,600,000
7,625,000
Industrial and
warehousing, £/ha
167,000
425,000
522,000
438,000
525,000
1,038,000
1,393,000
662,000
223,000
660,000
1,767,000
Business class
B1, £/ha
235,000
583,000
557,000
500,000
639,000
1,269,000
1,672,000
760,000
266,000
779,000
2,138,000
In the eighties residential and industrial land uses tracked each
other in the South.
A period of change in the early nineties
-taxes on residential land use were reduced
-Use class B1 was introduced combining office and industrial
uses
-A large number of retail developments were permitted
-Shopping hours were substantially extended
Result: Residential land prices have risen relative to other land
use prices
What would we expect to happen?
Heckscher Ohlin theory says:
Land using activities should move elsewhere, i.e. manufacturing
Land intensive activities should become dominant
Table 2: Composition of exports in European economiesi
UK
Goods
Services
Receipts of Income
Transfers
Totals
i
€bn
%
281
146
205
19
650
43
22
32
3
100
Germany
€bn
%
France
€bn
%
732
114
107
16
969
339
89
87
21
536
76
12
11
1
100
63
17
16
4
100
United Kingdom Balance of Payments: The Pink Book 2005, www.statistics.gov.uk; Germany:
German Balance of Payments in 2004 and Balance of Payments by Region, August 2005, Deutsche
Bundesbank, www.bundesbank.de; France, 2004 Rapport Annuel, La Balance des Paiements et la
Position Extérieure de la France, www.banque-france.fr
Tiefenbrun in the Journal of the Royal Society of Arts, August
2006.
‘the sad truth is that nobody in Britain has built a major
manufacturing company from scratch since the time of the Attlee
government of 1945. . . . .No other country has such a pathetic
track record of manufacturing business creation. All our major
manufacturers pre-date the Second World War’.
Or the Town and Country Planning Act of 1947!
Figure 2: Total occupation cost of prime industrial spacei
Lo
n
T o do n (
kyo We
(In st E
ner nd
L
)
To
k y on do Cen t , Eng
o(
Ou n (C ral ), land
t er ity ) Jap
Ce , En an
ntr gl
al) and
, Ja
Mu
H
mb Mo on g pan
s
ai
(Bo co w, Ko n
Du
g
ba
m
b ay Russ
i, U
i
n it
a
)
ed Paris , Ind
Ar , F ia
ab ran
E d Dub E mir ce
M i n b l in at e
Pa anc u rgh , Irel s
ris
,
a
h
La es ter Sco tl n d
Dé , E and
Seo fens ng la
ul, e, F nd
ra
S
Bi r L e out h n ce
mi ed Ko
ng s, E rea
h
Ne am, E ngl an
w
d
n
Br Del h g land
i
i
s
,
Gl t ol , Ind
Z u as gow En gl i a
a
ric
Ne
h, , Sco n d
w
S
t
w
l
a
Y
Lu o rk - Abe M itzerl n d
i
xe
mb Mid rd ee lan, and
our tow n , S It al
g C n M co y
tl
Fra
i
nk Ge t y , L an ha and
fu r ne uxe tta
t am va
m n
Ma , Swi bou rg
i n, t ze
Ge rlan
rm d
M
St o
ckh adrid any
olm , S
Rio Jers , Sw p ai n
de ey, ed e
T o B Jane E ng l n
ron rus iro and
to , s el s , Br
a
,
C
Liv an ad Belg zi l
erp a ( i um
C
o
Ca Mun ol, E BD)
l ga ic
ry, h, G ng lan
Ca erm d
Sh
nad a
ang
a ( ny
hai
R
(Pu o m CBD
e,
)
d
Sh Bar ong) It aly
a
,
c
Wa ng ha el on C hi
s hi i (P a, S na
n g ux
to n i), p ai n
,
C
Ath D C (Ch i na
Sã en s, BD
Am Sin ga o Pau G ree )
st e p or l o, B ce
rda e,
m, Sin razil
N ga
T et he p or
Sy aipei, rland e
dne Ta s
y, iwa
Au n
Sa
Ab
O
n
s
uD
J ua lo , st ral
hab
n, P No ia
rw
i, U
u
n it Bei erto R ay
ed
jin
Ara g, C ico
b E h in
mi a
rat
es
Figure 3: Occupation costs in world cities[i]
http://www.cbre.com/USA/Research/Market+Reports/Global+Market+Rents/
Occupation cost US$/square foot per annum
200
180
160
140
120
100
80
60
40
20
0
Housing and Brown Field Sites
-because most brown field sites are in a profitable use, the policy
of encouraging house building on old factory sites strengthens the
pressure on other activities
- earlier there was a presumption of separation with land for
manufacturing industry being somewhat protected, particularly in
the North.
Other Policy Aims
Regional Policy?
Not since Thatcher has a government claimed this.
Then, because high land prices were not a consequence of
constraint.
Now, because simply deterring companies from the South does not
mean that they go north!
A Policy for Urban Regeneration
But what are the costs?
A Policy for Sustainability (Global, that is)
But building tall buildings is expensive and inefficient
Importing manufactured goods from elsewhere in the world
does not necessarily reduce CO2 emissions and fuel use
Other consequences for the population
High living costs because the cost of land is high
UBS study of 71 cities round the world (Feb-July 2006)
Cost of a ‘Weekend Break’ in US dollars
1. London 1,180 USD
2. Tokyo
3. Geneva
1090
940
4. New York 920
Living Cost Price Index (inc Rent)
1. London
105.5
2. New York
100
Living Cost Index (exc Rent)
1. Oslo
121.5
2. London
110.6
3. Copenhagen
109.2
7. New York
100
Wage Level Indices
6. London 89.2 (gross) 96.0 (net)
Domestic Purchasing Power of Wages
London ranks between 17th and 23rd
But this is with a measure of the cost of living which excludes
rent
Including rent it drops to something like 40th
- UBS does not do the calculation
Another measure- How much does IKEA charge for a
standard package of five large items?
UK
£1483 (VAT rate 17.5)
France £1453 (VAT rate 19.6)
Italy
£1450 (VAT rate 20.0)
-
Germany £1229
Other non-price costs
High space costs have other effects
Lack of choice – the clone town
Crowding – the two (or three) sittings restaurant
Which is why, on a BBC survey 13% of the population is
hoping to emigrate “in search of a better quality of life, better
weather and a feeling that the UK is too expensive.”
The Distributional Problem
Constraint on housing favours older home owners at the
expense of renters, young would-be owners, and young owners
who wish to trade up
Constraint in other areas favours share owners, those with
accumulated pension investments in land, etc.
The whole system of constraint is thoroughly regressive –
which is why it’s favoured by the middle classes.
Systemic (non-constraint) problems
Delay would not be bad if the result were better decisions, but
is the system rational?
1. Is delay because bureaucracy is built in?
2. Is it rational that Kate Barker can investigate the whole
system in less than a year, whilst inquiries into a temporary
terminal at Coventry Airport lasted years? Should she not
have had QCs and expert witnesses and cross-examination
and exhibits and so on?
3. Is delay built in because it keeps objectors happy?
Politicians can assure people that they have looked into things
thoroughly.
4. Would less consideration of detail be better?
Growth Italian Style
‘Il Sorpasso’
In the Val Vibrata, in central Italy, “every house has turned into a
factory” and growth has been spectacular.
In the late eighties The Times said that this should be an example
to the English of what could be achieved in backward rural areas.
But the UK planning system would soon put a stop to any such
ideas.
As would the British as neighbours.
Interest rates
Because of the housing market and endemic rising prices
interest rates in the UK are frequently raised to slow down the
housing boom. This impacts on industry.
Recommendations
1. Get rid of ‘plan led’ planning.
2. Rethink green belts in the interest of sustainability.
3. A Social Cost Tariff – the social value of green fields. If this
can be paid there should be a presumption in favour of
development.
4. Less concern with detail – promote simplified planning zones
5. Incentive to local governments to allow development i.e.
they retain the tax income which results. At present there are
disincentives rather than incentives
Postscript
Why are the British so concerned about land?
1. Complete misapprehension (Barker)
2. Propaganda from the CPRE and its allies
3. The psychology of the way of life (people are kept away from
the country so that they can’t spoil it)
4. The psychology of inter-urban travel
5. The flatness of England, the south in particular
6. Is it, in fact, completely irrational, a matter of faith not reason.