The Best Laid Plans

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The Best Laid Plans

• ____________________
• Planning and Economic Growth
• No Room! No Room! (1987)

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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
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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!)
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• The effect is redistributive and divisive
• the haves versus the have-nots
• the old versus the young

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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
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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) dont think
economically the Rogers Report had virtually no
economic input and was economically
illiterate. Its up to planners to plan and the
market to follow But what if the best land use
plan results in a sub-optimal economy?
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• 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

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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
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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!
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Figure 3 Occupation costs in world citiesi
http//www.cbre.com/USA/Research/MarketReports/Gl
obalMarketRents/
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• 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.

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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!
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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
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• 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
• London 1,180 USD
• Tokyo 1090
• Geneva 940
• New York 920

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• Living Cost Price Index (inc Rent)
• London 105.5
• New York 100
• Living Cost Index (exc Rent)
• Oslo 121.5
• London 110.6
• Copenhagen 109.2
• 7. New York 100

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Wage Level Indices 6. London 89.2 (gross)
96.0 (net) Domestic Purchasing Power of
Wages London ranks between 17th and 23rd
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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
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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
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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.
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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 its favoured by the middle classes.
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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?
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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.
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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.
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• Recommendations
• Get rid of plan led planning.
• Rethink green belts in the interest of
  sustainability.
• A Social Cost Tariff the social value of green
  fields. If this can be paid there should be a
  presumption in favour of development.
• Less concern with detail promote simplified
  planning zones
• Incentive to local governments to allow
  development i.e. they retain the tax income which
  results. At present there are disincentives
  rather than incentives

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• Postscript
• Why are the British so concerned about land?
• Complete misapprehension (Barker)
• Propaganda from the CPRE and its allies
• The psychology of the way of life (people are
  kept away from the country so that they cant
  spoil it)
• The psychology of inter-urban travel
• The flatness of England, the south in particular
• Is it, in fact, completely irrational, a matter
  of faith not reason.