The Impact of Changing Planning Policies on the Housing Market

This paper provides a review of some of the key articles and research examining the relationship between planning regulation and its impact on the housing market in the UK and the US. In both countries, demographic change coupled with economic growth has increased demand for housing units and in the UK, over 4 million new units are estimated to be needed by 2016. Given these pressures, the interaction of the planning system and the housing market is critical. The articles reviewed below mainly adopt a mainstream economics approach to modelling the impact of planning on housing markets. They are concerned with outcomes. An additional or alternative approach is provided by behavioural analyses of the relationship between planning and housing development. These enable the more complex interactions to come to light. This paper indicates the differences that exist between the UK and US planning approaches; however, in both countries, planning constraints are seen to raise price, reduce supply, increase density and, in the UK at least, reduce choice. However, planning is also seen to provide certainty and reduce risk. Of key interest is the price elasticity of supply of housing. Post-war estimates suggest a value for the long-run elasticity to be between 0 and 1 for the UK, and 6 to 13 for the US.