Land-Use Restrictions Cause Housing Shortages in Britain, too

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As I have often emphasized in various writings here at the Volokh Conspiracy and elsewhere, zoning restrictions on housing construction greatly increase the cost of housing in much of the United States, and block millions of people from moving to areas with greater job opportunities. In a recent column in the Financial Times, prominent British economic policy commentator Martin Wolf describes how the UK suffers from much the same problem:

Here are two facts about land use in England: houses and gardens occupy just 5.9 per cent of available land; and land with permission to develop can be worth 100 times as much as land without it. The notion that there is a shortage of land for additional housing is ludicrous. Moreover, the planning system is much the biggest market distortion in the economy: it is throttling supply, to the benefit of homeowners, who have made huge unearned gains. In a column on 21 March, I argued that inadequate supply explained why house prices had risen so much in some parts of the country…..

Almost all the debate is cast in Soviet terms: “need”, not demand, and numbers of units, not prices. But market signals are telling us that the public wants more land in residential use, which is vastly more valuable to them than in its main current use, agriculture….

We need to introduce a presumption for development based on three considerations: the value of a piece of land when developed, against its value in current use; its amenity value in current use; and the cost of providing needed infrastructure. Where the first greatly outweighs the second plus third, development should not only be allowed, but mandated…

In a previous column, published on March 21, Wolf explains how land-use restrictions cut off many Britons from moving to areas with greater job opportunities—much like zoning does in the United States. Unlike Wolf, I would not go so far as to “mandate” development. But the rest of his reform agenda for Britain makes excellent sense. It is, in fact, similar to that of the cross-ideological zoning reform movement in the United States: lift restrictions that prevent the construction of new housing in response to demand. Doing that can simultaneously increase economic growth, eliminate a major infringement on private property rights, and expand opportunity for the poor and racial minorities.

In a commentary on Wolf’s article, economist Alex Tabarrok describes how the problems highlighted by Wolf exist not only in the US and Britain, but also in many other places around the world, including Canada and India. As Tabarrok puts it, all of these jurisdictions would do well to “deregulate the market for land.”

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