Misunderstandings about Planning Restrictions


Link to paper



Many researchers have found that planning regulations restrict the supply of housing and hence increase its price. This paper discusses some objections to this finding.

I argue that most of these objections reflect simple misunderstandings. They are either empirically unrealistic or are not relevant to the view that planning raises prices.



·       ‘High prices have causes other than planning, such as low interest rates or immigration’.

o   These other explanations are important, but they are complements, not alternatives. High prices reflect the interaction of unresponsive supply (due to planning) and rising demand. If supply was more responsive, then high demand would lead to more dwellings instead of higher prices. (Section 4).


·       ‘High prices accompany high density’

o   Simple correlations confuse the direction of causation. When the relationship is examined closely, as in leading journals, researchers find that restrictive planning substantially boosts prices. The consensus among experts is strong. (Sections 3, 4c).


·       ‘Construction has recently outpaced population.’

o   The criterion for assessing whether the stock of housing is adequate should be whether price equals the marginal social cost of supply. It is not comparing the flow of new construction with population fluctuations or past experience. (Section 5).


·       ‘Tall apartment buildings would reduce local amenity’

o   Studies find that externalities from high density are small or positive. Nearby house prices often increase in value following large construction projects. As judged by willingness to pay, increased density does not significantly harm local amenity. (Section 7).


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