The introduction of price signals into land use planning decision-making: a proposal

Although directed to the British system of Town and Country Planning the analysis and suggestions made in this paper have relevance for many OECD countries, including some with systems of land use regulation which have evolved entirely independently of the British. The paper starts by characterising the basic features of the British planning system and explains in brief outline how it works viewed from the resource allocation point of view of an economist. A conclusion is that the system explicitly excludes any price signals. The next section sets out a way in which by using the price premiums of neighbouring parcels of land zoned for different uses, information generated by price signals could be integrated into the decision-making processes of the planning system. The third section summarises the analysis and evidence supporting the need for such an adaptation of the planning system and explains the main problems that have arisen as a result of excluding price information in determining land supply.