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US planning system driven by powerful property owners

Strict planning regulations in US cities, such as San Francisco, Los Angeles and New York, are partly driven by powerful property owners protecting their own interests, rather than by considerations about quality of life only, says new research from LSE.

According to the paper forthcoming in the Journal of Urban Economics, because desirable places have become more developed over time, homeowners and landlords who own the developed land are in the majority and are more influential than people who own land that has not yet been developed. Developed land owners then use their power to vote and lobby local planners to restrict further building.

Dr Christian Hilber, co-author of the paper and associate professor of economic geography at LSE, explains: “For the owners of developed land the less plots there are available for construction the better, because this creates scarcity and so raises the value of their land.”

Los AngelesThe researchers used data from almost 100 metropolitan areas in the US and found that nice cities – with, for example, access to the ocean or mild winters – are more populated and their land is more developed than that of less desirable places.

This means that the proportion and quantity of developed land rises, shifting the political power from owners of undeveloped land – who favour urban expansion – to owners of land that has already been developed.

In line with this, the researchers found that the more developed cities become, the more likely that planners impose tight regulations that prevent new housing construction, thereby generating housing shortages and affordability crises.

Factors such as the desire to protect open space and the share of Democratic voters in an area were also associated with tighter regulation. However, when the researchers controlled for these -  and other factors - a strong link between degree of development and regulatory restrictiveness remained.  

Frédéric Robert-Nicoud, professor of economics at University of Geneva and co-author of the paper, said: “There are good reasons to regulate, for example, to prevent excessive sprawl or protect public parks. However, our findings suggest that regulation in highly desirable places such as New York and San Francisco have gone too far and have become grossly over-restrictive.”

“This means that house prices go up, making it very difficult for people to get a foot on the ladder, but it also means they are more volatile. This could be tempered by more relaxed planning regimes that allowed, for example, more land to be developed or taller buildings to be built and so provide a more elastic supply of housing.”

Dr Hilber said: “US planning regulations are currently the outcome of a political system rather than concerns about providing good places for people to live. The mechanism will need to change before we see a planning system that reflects the needs of more people, not just those with a powerful lobbying vote.”

Posted: 18 March 2013

'On the origins of land use regulations: Theory and evidence from US metro areas', Journal of Urban Economics [subscription needed]

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