Planning for Future Housing Demands: European Experience

Christine ME WhiteheadLondon School of Economics

Moscow 13 May 2010

The Fundamentals of Planning

• Well operating land use planning systems organise development to overcome market failures and generate positive spillovers

• Planning to be relevant must therefore change the outcome as compared to the market outcome

• The majority of planning mechanisms are inherently restrictive

• Well-operating planning systems should increase the value of land because of better organised land uses and services and this increases demand for and the price of land

• “Over regulation” will increase land prices above these levels – and increase the price of housing and other constrained uses

Three Main Planning Approaches• Planning permission required for individual

developments within a general framework – (UK and – as modified by later legislation – those countries with UK based systems);

• Zoning approach by which size of metropolitan urban limits are set and within these limits land is allocated to particular uses/densities etc. Those wishing to develop can do so as of right as long as conform to regulations (USA and related systems);

• Master Planning approach by which a plan is developed to include infrastructure, housing etc and allocates land uses within that framework – with rights to develop in conformity to the plan (much of Europe)

Enabling development• The UK system is seen as being ‘Stalinist’ in that

government controls development right down to site level; major complaints are about whether enough land is made available and the uncertainty of the system;

• The zoning system is seen as much more market oriented – but this depends on how the plan is set and the inbuilt regulations – e.g. overzoning – as well as the use of covenants and other approaches to limiting development;

• Master Planning is seen as too resource intensive and design rather than economic or socially oriented as well as being unresponsive to change

• But are all ultimately a mixture? Zoning systems subject to appeal and negotiation; permission systems include elements of plan based approach – ultimately a democratic decision making process?

Government structures• All European systems based on central government

framework – sometimes advisory, sometimes legally binding

• Regional/state layer sometimes has powers to provide further legislation – Germany/Spain – but usually plans within central government framework: to bring localities together France; to interpret national guidance at local level – UK/Ireland/Netherlands

• Local government has powers of implementation – through local plans– sometimes legally binding France (PLU)/Germany; sometimes providing a plan within national guidelines – UK/Ireland/Netherlands

• Local government also has regulatory powers re densities/ building typologies and standards/sometimes tenure

• Size of local authorities: from 120,000 UK to under 5,000 in Spain, Germany, France

More specific powers

• Designation of zones for development – eg France – ZACs; Ireland – SDZs; Germany UDZs – usually simplify planning procedures and aim to ensure infrastructure in place;

• Affordable housing requirements within plan: France, Spain; negotiated – Ireland/UK;

• Regional balance issues - France/Netherlands /Germany - strengthening weaker economies

• Top down pressures to enable supply of more housing– Ireland/UK

Interaction between Planning System and other Processes

• Land assembly – large local authority powers of assembly in Netherlands/Germany/France – expected to ensure adequate land for development- sometimes even serviced plots

• Public/semi public local development agencies –Germany/UK

• Infrastructure provision – Netherlands/France• Land banking Germany/Netherlands• Incentive systems to municipalities– eg

developers must give 10-15% of land to municipality in Spain; government funding in relation to population Germany; developer contributions for infrastructure Germany/UK/Ireland

The UK System as an Example: Starting Point

The Town and Country Planning Act 1947• Nationalisation of development rights – so

separation of ownership and rights to use land;• Planning permission required for change of use;• Development control based on density, dwelling

types, amenity, access to transport etc. – not on economic variables as such and not on tenure;

• In addition building regulations and codes • General objectives to ensure socially desirable

(optimal) allocation of land and to ensure all households could be properly accommodated

• Main emphasis on ensuring access to housing for all – with large scale public sector building (own land/give permission/build)

Policy development since 1947• The basics of the 1947 Act have remained almost

unchanged – still permission for individual developments;

• 1990 Town and Country Planning Act introduced local plans – now called Local Development Frameworks – within which local authorities were required to allocate enough land for housing and other purposes. However these plans are indicative – did not give the right to develop if that development conforms to the plan;

• 1990 Act also made affordable housing a material consideration. Section 106 enabled local authorities, if they identified housing need through a housing needs assessment; to require developers to provide a proportion of housing in the form of affordable housing – part social rented housing and part intermediate – mainly low cost home ownership. This is achieved through a contract between the authority and the developer

Latest Developments• Land use planners have the legal

responsibility to ensure an adequate flow of land for housing and other activities. The tools they use to assess requirements are mainly quantitative

• Economists use price based indicators to assess the march between demand and supply – and therefore the desirable allocation of resources

• Government is aiming to marry these two approaches to ensure a partnership between the market and planning to ensure an adequate housing supply

UK Government Aims• To set a numbers – i.e. quantitative

target, based on demographics and backlog but with the addition of affordability – i.e. price based target - as measure of pressure

• To be achieved through the traditional planning system plus large scale funding from central government, land and Housing Associations

Process Development: Central Government Guidance

Central government issues planning policy guidance. Originally PPG now PPS. PPS3 on Housing includes

adviceon: • calculating the numbers of homes required and the

associated land take required for 15 years ahead taking account of affordability;

• suitable densities – including policy on densification;• a brownfield strategy requiring 60% plus of all housing

to be on reused land;• determining the proportion of affordable housing in

the region and local area; • ensuring mixed and sustainable communities – seen

as meaning mixed income and therefore mixed tenure;

• design and standards

Regional Responsibilities

• Regions are required to determine a housing strategy for the whole region

– Identify the land requirements associated with these projections

– Link the housing strategy to the regional development and infrastructure plan

– Clarify the need for affordable housing and therefore the proportion of new build that should be affordable

– Allocate these between sub regions and local authorities

LA Responsibilities

• Local authorities have the legal responsibility to:

– Identify local housing needs

– Identify the potential for use of the existing stock; reuse of land and locate potential sites within a local development framework

– Provide a fifteen year supply of land for feasible development

– Determine the mix of affordable and social rented homes within these projections

– Negotiate with developers to provide the affordable housing in one way or another

GLA Planning Powers• Core planning power: Strategic Plan ‘The London

Plan’• Subject to consultation and examination in public; plus

agreement by central government• Regular revision of the Plan and associated strategies• These cover all aspects of land use including in

particular housing; transport; and the environment (waste management; carbon emissions etc.)

• Also has powers to determine densities etc. within government guidance

• Also power to call in large scale developments – tall building strategy etc.

• Relationship between rhetoric and reality?

Housing within the Regional Strategy

• The housing strategy specifies the desired output level – taking account of constraints as well as needs – and allocates this total between boroughs

• It also specifies the general rules for the allocation of affordable housing and the mix between social rented and intermediate housing that boroughs should achieve

• The housing strategy also includes an emphasis on mixed communities and advice/regulations on density etc

• The provision and allocation of new housing and of major regeneration schemes (supported by HCA) are the main instruments available to support social objectives

Two Approaches to Measuring Requirements

1. The traditional projections approach is based on:

• Demographic projections to estimate the likely additions to households;

• An estimate of the backlog; and• Assumptions about vacancy rates, second

homes, demolitions etc.• Importance of increased longevity; changing

make-up of population; migration; and increased propensity to form households

• The backlog is estimated in relation to government policy commitments

Interpreting the Results• This approach is not a forecast but

provides a baseline projection of additional requirements from past trends and an estimate of the proportion of these households in need of additional assistance

• Success is measured in quantity terms – including net additions, numbers of households accommodated and what is happening to the backlog

• Prices and affordability not directly included except in terms of the proportion of affordable housing required

The Affordability Model• The model is based on economic/behavioural relationships• The objective is to understand how additional housing

supply impacts on house prices at the national and regional levels – and therefore on affordability

• It includes estimates structural equations –– household formation– demand for market housing based on price and income

elasticities (i.e. how demand responds to a change in price or income)

– vacancies/second homes/demolitions– long-run supply

• It is basically a filtering model where new build enters the system and generates changes in all other variables

• Equally changes in demand by existing households filters through the system affecting price and access to housing for new households

Interpreting the Model (i)• The model is based on long run

relationships in terms of price (and therefore market response) rather than quantities – it does not estimate the effect of short term variations

• Demand can be satisfied by increasing investment in the existing stock as well as by net new additions to the stock

• Success is measured by the impact on prices and relative prices across the country

• Net new additions and affordability are partial measures of success

Interpreting the Model (ii)• What we observe is the outcome of short

term as well as long term pressures – so the outcome at any given time will never look exactly like the model

• The model helps us to understand behavioural responses in the market as a whole and how that impacts on additional requirements and prices

• It also makes clear the very significant costs of constraint – which must be taken into account in planning decisions

Conclusions• Different approaches – but framework always set

centrally; detailed decisions always local• Plan led and developer led systems converging – other

objectives- environmental/climate change – but also issues of NIMBYISM/ BANANAISM etc

• Planning alone never the answer – issues of land assembly; incentives to municipalities; paying for infrastructure; public land ownership; government support for social housing etc

• Oversupply in Ireland and Spain seen as as much a problem as undersupply in UK and Netherlands- but also important changes in segments of demand /types of build /types of tenure

• Post credit crunch – government support a core element in maintaining development especially in France/Netherlands/UK – longer term position unclear