Broken market or broken policy? The unintended consequences of restrictive planning

| Publication date: 1 Aug 2018 | Theme: Macroeconomics | External Author(s): Cheshire, P | JEL Classification: R13, R38 | Journal: National Institute Economic Review Issue 245 | Publisher: Sage Publications, London

This paper summarises the evidence from recent research relating to the British Planning system’s impact on the supply of development. Planning serves important economic and social purposes but it is essential to distinguish between restricting development relative to demand in particular places to provide public goods and mitigate market failure in other ways, including ensuring the future ability of cities to expand and maintain a supply of public goods and infrastructure; and an absolute restriction on supply, raising prices of housing and other urban development generally. Evidence is presented that there are at least four separate mechanisms, inbuilt into the British system, which result in a systematic undersupply of land and space for both residential and commercial purposes and that these have had important effects on both our housing market and the wider economy and on welfare more widely defined.

Keyword tags: 
economic efficiency
housing supply constraints
land use regulation

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