How can planning help the UK meet its development needs? A behavioural economic perspective
Reports in the national press would suggest that urban planning in the UK is less than popular. Variously described as glacial, associated with Communism and decried as a brake on development, political figures have lined up to point the finger at urban and environmental management as an enemy of growth. At a time of straitened public finances, a wider climate of austerity and rates of productivity that lag behind our continental neighbours, it is a particularly bad moment to be singled out for these offenses.
Academic grist to the political mill is provided by studies that point to the economic costs of planning. Regulation – bundling together ideas such as the delays associated with scrutiny of development proposals and the corresponding diminution of grand plans through the act of development control – can clearly be understood as a cost and an inhibitor of growth. In turn it is not far from here to the conclusion that some form of deregulation, or at the very least a reduction in planning control, would help encourage the construction of new and more affordable housing.
But is this really true? Would we be better off with less planning?
To answer this question, we first need to consider the positive things that planning might do – a corrective to the understanding that it produces primarily costs. If we remain within the neoclassical and econometric traditions from which most existing analyses emerge, this would mean engaging with economic valuations of the natural and historic built environments. Much of this literature points to the contingent value of green space, well-integrated transport networks and good quality urban design: all features which lie squarely within the remit of planning.
Moreover, we might also look to a different branch of economics, where the idea that markets as social constructs might sometimes need ‘making’, to shed light on what planning might achieve in a systemic sense. Behavioural economics and game theory demand that we reconsider the first principles upon which we theorise economic decision-making. The psychology of the individual, particularly the way this informs the economic strategies they employ, is the cornerstone of these aspects of economic theory. It also forms the basis for the ESRC-funded Urban Transformations project “Simulations for Innovative Mechanisms for the Self-organizing (SIMS) City: Testing New Tools for Value Capturing” where researchers from across four European countries have come together to explore the applicability of principles from game theory and behavioural economics to the development process.
The value of this approach is particularly relevant to urban development (widely construed) as the built environment is such an odd asset class. Features such as the highly geared nature of the development industry, its corresponding susceptibility to shocks, the requirement for some form of site-assembly where land is held in multiple ownership as a precursor to development, and a very significant temporal lag between acquisition of the underlying asset (land) and the delivery of the final product in the shape of new buildings. all contribute to the peculiarities inherent in real estate and infrastructure. And all this before mention is made of the incredibly important factors that govern the rationalities that underpin transactions in this sphere: place-attachments, sentimental value, environmental sustainability, ethics and local democracy. To take just one example from this set of fundamental issues, a central question occupying the researchers working on the SIMS Cities project is whether decision making under conditions where that decision casts a very long shadow might systemically encourage risk-aversion and correspondingly make protracted deliberation and conservative decisions more likely. The relevance of this question to the development process where the right to build results in irrevocable landscape altering effects that may last a century or more is clear. For these reasons land and development are unique, and require a much richer economic treatment than just that provided by an estimation of the costs associated with regulation.
Ultimately our collective frustrations in the UK at our inability to produce new housing rapidly, at a time when it is so sorely needed, may stem from the constant reminder in the historic built environment that we once could. The rich Georgian and Victorian heritage that dominates many British cities presents an almost unwelcome reminder of when a breathless form of urban development was the counterpart to Britain’s position at the forefront of the world stage. Hankering after that can-do spirit is understandable, but it should be moderated by two clauses. Firstly, the fundamental planning problems of land assembly, orchestrating the sometimes divergent wishes of multiple agencies and the integration of housing, transport and wider facilities were first confronted in the nineteenth century through a symbiotic marriage of industry and embryonic planning agencies – comprising what were, then the prototype for today’s local governments. Secondly, since this time, in other societies alternative ways of managing this inherently complex economic process have evolved. Good examples can be found in our nearest continental neighbours such as Germany and the Netherlands as well as cities such as Hong Kong and Singapore. We may be able to learn something from these overseas contexts about the behavioural-economic characteristics of the development process and, in turn, how we might seek to re-imagine planning in the UK.
The enduring questions with which planning deals are fundamental to how human beings make and relate to their environment. Our capacity to rethink our response to them may therefore be dependent upon reconsidering the relationship between a market-making state and a development industry that appreciates the certainty that such a framework can provide.