Monday, April 16, 2012

Evidence for Regulatory Constraints on Housing Types

A new paper by Alan Evans and Rachael Unsworth ("Housing Densities and Consumer Choice" Urban Studies, 49(6), pp. 1163-1177, May 2012) provides some evidence for the role of local regulations on residential development. Here is the abstract:

From 2001, the construction of flats and high-density developments increased in
England and the building of houses declined. Does this indicate a change in taste or
is it a result of government planning policies? In this paper, an analysis is made of the
long-term effects of the policy of constraint which has existed for the past 50 years but
the increase in density is identified as occurring primarily after new, revised, planning
guidance was issued in England in 2000 which discouraged low-density development.
To substantiate this, it is pointed out that the change which occurred in England did
not occur in Scotland where guidance was not changed to encourage high-density
residential development. The conclusion that the change is the result of planning
policies and not of a change in taste is confirmed by surveys of the occupants of new
high-rise developments in Leeds. The new flat-dwellers were predominantly young and
childless and expressed the intention, in the near future, when they could, of moving
out of the city centre and into houses. From recent changes in guidance by the new
coalition government, it is expected that the construction of flats in England will fall
back to earlier levels over the next few years.
The authors had a natural experiment where England and Scotland had very different regulatory policies during the past decade. Here is how the authors describe their research question:

The question we address is: ‘what was driving this move to higher densities?’ Is it that there has been a change in taste, with the English suddenly preferring to live in flats rather than houses? This is one alternative, a view which was put to one of the authors recently by a senior planner—“People are buying these flats so they must want them”. The other alternative is that the shift results from a combination of government policies, mediated by economic pressures, a view which might be similarly summarised as ‘People are buying these flats because they can’t afford anything else’.
Through surveys and analyses of housing markets in Leeds, the authors conclude that consumer preferences are not the leading factor driving development of high density housing. Rather, the relaxation of governmental policy is the key influence. The survey respondents were mostly young and single, and their choice to live in a flat was largely economic (i.e. what they could afford) and they hoped to move to lower density housing as they formed families.

A comment that I will add to this is that we know that young people are 1) driving less, 2) starting families later in life, and 3) living alone more often than previous generations. What we don't know is if these characteristics reflect permanent shifts in preferences for housing and transportation. Time will tell. In any event, the paper discussed here offers encouragement for those who think land development is over regulated and for those who think that suburban landscapes reflect market preferences. There will never be a perfect match of consumer preferences and regulatory policies, but hopefully local regulations can be flexible enough to accommodate heterogeneous desires.

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