The Land Use Planning System: Evaluating Options for Reform

Citation

Karadimitriou, N. (2005), "The Land Use Planning System: Evaluating Options for Reform", Journal of Property Investment & Finance, Vol. 23 No. 1, pp. 109-110. https://doi.org/10.1108/14635780510575120

More than 50 years after its foundations were laid, the UK planning system is undergoing yet another overhaul. However, surprisingly little research has been done on evaluating its economic efficiency. What are the system's objectives? What are the costs and benefits accrued in the pursuit of those objectives? Are there alternative, more efficient ways of pursuing these objectives? Are these objectives worth pursuing at all? This Hobart Paper is a first attempt to touch upon these and many other issues that the author believes have not attracted sufficient attention thus far.

The first chapters of the paper provide background information on the UK planning system. After a brief historical account and a review of the major points of concern identified in the recent Planning Green Paper, the paper moves on to argue that an economic evaluation of the planning system is “long overdue”. The alleged cause is that for planners, evaluation does not necessarily relate to economic criteria and even if it did there are inherent difficulties in measuring the costs and benefits of policies whose objectives are not clearly defined.

The paper then presents the basic tenets of the UK planning system. The author draws on the experience of industry nationalisation to argue that nationalised development rights, combined with the discretionary nature of the planning system lead to inefficient land allocation. Therefore, it is argued, great efficiency gains could be made by privatising development rights and reformulating the planning and judicial systems accordingly.

Sustainability and sustainable development do not escape the author's criticism either. “Strong sustainability” is thought to be impossible to achieve whereas “weak sustainability” is deemed to be no different than “economic optimisation”. Therefore, the use of the term “sustainability” instead of “optimisation” is obscuring and should be avoided. Consequently, the author claims that instead of pursuing an ill‐defined “Utopia” such as sustainable development, land use planning should embrace economic optimisation (Pareto optimality in particular) as its strategic objective.

In order to internalise externalities and achieve optimality, significant changes have to take place in the legal system and various alternatives are available. An evaluation of those alternatives covers the next section of the paper. The discussion is based on Coase's normative theory and concrete examples from around the world are used to highlight particular points. The topics under examination include easements and covenants, planning gain as third party compensation and as betterment taxation, the green paper's treatment of planning obligations and third party rights of appeal, land development rights privatisation and the role of the courts, environmental impact fees and dispute resolution.

Next, the paper examines the theoretical merits and the practical advantages of using market based instruments to achieve land use objectives like containment or brownfield re‐use. It is claimed that tradable development rights, the habitat transaction method and taxes and levies on greenfield development look promising in a US context but would require substantial background research before they could be implemented in the UK.

It is recognised that the policy implications of the shift that the paper calls for are immense. With privatised development rights, the role of judicial review in determining planning applications would have to be substantial rather than procedural. Similarly, the courts would be the final arbiter in matters of third party compensation. Environmental impact assessments would be used to ascertain who benefits and who loses and what the amounts involved are. The aim of taxes or tradable rights would be to internalise externalities and direct compensation of the losers would be given top priority. Finally, development plans would have to be replaced with “prohibitive” rather than “positive” zoning.

In its conclusions the paper calls once more for an “economic approach” to land use planning. This, according to the author, is the most democratic and efficient way to achieve tangible objectives. The “Utopian” strategic objective of sustainable development should be replaced by “a commitment to economic optimisation” focused on the internalisation of externalities. This in turn could be achieved with the privatisation of development rights and the operation of the judicial system as the ultimate dispute resolution mechanism. Complementary mechanisms for third party compensation (such as environmental dispute resolution or planning gain) would keep litigation costs low. It is claimed that restructuring the planning system around third party rights would not only promote economic efficiency but would also de‐politicise land use planning.

The Land Use Planning System: Evaluating Options for Reform is making a rather radical argument. It heavily criticises the limitations of the post war planning “consensus” and disapproves of sustainable development's use as a guiding principle for land use planning. Novel ideas on how to overcome those limitations are indeed a useful contribution to the debate on the reform of the UK planning system. However, the reliance on cost benefit analysis and the judicial system should alert the reader to the limitations of the paper's proposals. The North American approach, to which the author often aspires, suffers by its own weaknesses which have led to equally heated debates about its effects on social equity and economic efficiency. Nevertheless, the paper makes an interesting and coherent case for reform and it is worth reading by those who wish to build up a deeper knowledge of the subject area.