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The value of planning - seeing the bigger picture

20 June 2014

Professor David Adams

Imagine if the Chancellor of the Exchequer were to propose a budget based solely on public expenditure, without taking any account of taxation. Or if a household were to construct its finances simply on the basis of what it spent, ignoring what it earned. Too often, however, reputable economists and politicians attack planning on the basis of what it costs, without making any attempt to assess its benefits.

We desperately need to improve the quality of this debate by thinking about the costs and benefits of planning in the round and seeing what can be done to produce greater benefits from planning at less cost. That is why the recent research report written for the RTPI by Professor Craig Watkins from the University of Sheffield and myself is entitled ‘The Value of Planning’. Its purpose is to take a more holistic view of what is meant by ‘planning’ and to set out some directions about how we might arrive at a more robust analysis of its costs and benefits.

We desperately need to improve the quality of this debate by thinking about the costs and benefits of planning in the round and seeing what can be done to produce greater benefits from planning at less cost.

‘Planning’, as the report indicates, is about much more than development management, important as this activity is. We see planning as the deployment of policy instruments that seek to shape, regulate and stimulate market behaviour, while also building the capacity to do so. This means that we should think about planning strategies, masterplans, town centre management, and land assembly by compulsory purchase, for example, as equally significant aspects of the planning system as the regulation of individual development projects.

Often, these various instruments work together and reinforce each other. When they work well, they balance certainty and flexibility for developers, landowners, investors and other market actors. Indeed, as research has often shown, market actors see value in investing in well-planned areas where planning strategies and actions reinforce market confidence. This is especially the case when the private and public sectors work together in formal or informal partnerships.

As one would expect of any form of market intervention, there are also costs to planning. There is plenty of research evidence, for example, that market prices are higher in areas where development is tightly regulated than where it is not. Most of this impact seems to be due to land supply constraints, but sometimes heroic assumptions have to be made in econometric analysis, to try to measure this exactly. No wonder that the range of price impacts suggested by different economists is really quite varied, as so much depends on how they construct their models and on the data to which they gain access.

Moreover, if market prices are indeed higher in such areas, part of the reason could well be because planning creates public goods that are greatly valued by consumers. Hedonic analysis, for example, tells us that living next to an attractive park can add at least 20% to the value of a house. So when planning works well, and produces better places, it will strengthen the demand for land and property, rather than merely constrain the supply.

Unfortunately, some of the most widely-quoted economic studies of planning have focused primarily on supply-side effects of planning, and ignored demand-side effects. They are often based on some theoretical notion of perfect competition, when it is widely known that in the real world, the housebuilding industry, for example, is dominated by a small number of large firms and that monopolistic competition is the order of the day.

Much of the research undertaken so far on the costs of planning, while variously helpful and provocative, takes us to base camp but no further. There is still a mountain to climb if we want to understand the true value of planning and to know what needs to be done to best enhance it. Climbing this mountain needs to be at the forefront of planning research, and become a prime focus for the planning academy, in the years to come.

For example, we urgently need to develop a more complete and balanced assessment of the impact of planning on market, social and environmental outcomes. Alongside this, we require clearer evidence of the way in which the costs and benefits of planning are distributed within settlements, across neighbourhoods, and between settlements, districts and regions. This requires us knowing exactly how market information already informs planning decisions, and understanding what type of market information is needed, but does not yet exist, to do this more successfully in future.

We could also learn much more from European experience about how value is added through collective action when strategic planning is linked to ownership control and infrastructure delivery. It might also be the case that the UK could benefit economically from adopting more certain and pre-defined forms of development regulation, as practised in much of mainland Europe. Comparing the advantages and disadvantage of the different national approaches to development regulation is thus also worthy of serious investigation.

Alongside these studies of planning in practice, we need to assess, and maybe rethink, how development economics in taught in planning education, to ensure that the next generation of planners has greater confidence and knowledge to engage in economic debates. And because planners in practice are essentially themselves market actors (whether they realise this or not!) we need to identify how they can best enhance their capacity to transform development activities and markets.

As a learned society and the champion for the art and science of planning, the RTPI should now set itself the task of persuading governments and the research councils to work with the profession in climbing this research mountain and ensuring we learn much more about the real value of planning, and how best to enhance it for everyone’s benefit.

The Value of Planning report and a briefing paper based on the research can be found on the RTPI website.

About David Adams

David Adams holds the Ian Mactaggart Chair of Property and Urban Studies at the University of Glasgow, and was previously at the Universities of Aberdeen, Reading and Manchester. He is a Chartered Surveyor, Chartered Town Planner, member of the Society of Property Researchers, the Housing Studies Association, the Regional Studies Association and the Royal Society of Arts. David's research interests include state-market relations in land and property, with a particular interest in land, planning and regeneration policy. He has previously undertaken extensive research on land ownership constraints to urban redevelopment, and more recently co-authored a book published by Routledge entitled "Shaping Places: Urban Planning, Design and Development".