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The introduction of price signals into land use planning decision-making : a proposal

Cheshire, P. C. and Sheppard, Stephen Charles (2005) The introduction of price signals into land use planning decision-making : a proposal. Urban Studies, 42 (4). 647 -663. ISSN 1360-063X

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Abstract

Although directed to the British system of Town and Country Planning this paper has relevance for many OECD countries, including some with systems of land use regulation which evolved entirely independently of the British. The paper starts by characterising the basic features of the British land use planning system, viewed from the resource allocation point of view of an economist. A conclusion is that the system explicitly excludes any use of price signals from its decisions. The paper then summarises the problems which the exclusion of price information has given rise to. Because the UK planning system has deliberately constrained the supply of space, and space is an attribute of housing which is income elastic in demand, rising incomes not only drive rising real house prices but also mean that land prices have risen considerably faster than house prices. Several housing attributes other than garden space are to a degree substitutes for land but the underlying cause of the inelastic supply of housing in the UK is the constraint on land supply. The final section proposes a mechanism which would make use of the information embodied in the price premiums of neighbouring parcels of land zoned for different uses. Such premiums signal the relative scarcity of land for different uses at each location and should become a ‘material consideration’ in planning decision-making. If they were above some threshold, this should provide a presumption of development unless maintaining the land in its current use could be shown to be in the public interest. If combined with Impact Fees, such a change would not only make housing supply more elastic and the system more transparent but would help to distance land availability decisions from the political process.

Item Type: Article
Official URL: http://www.tandf.co.uk/journals/titles/00420980.as...
Additional Information: Published 2005 © Taylor & Francis. LSE has developed LSE Research Online so that users may access research output of the School. Copyright and Moral Rights for the papers on this site are retained by the individual authors and/or other copyright owners. Users may download and/or print one copy of any article(s) in LSE Research Online to facilitate their private study or for non-commercial research. You may not engage in further distribution of the material or use it for any profit-making activities or any commercial gain. You may freely distribute the URL (<http://eprints.lse.ac.uk>) of the LSE Research Online website.
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
Sets: Departments > Geography and Environment
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 05 Jan 2007
URL: http://eprints.lse.ac.uk/568/

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