Many government interventions in markets though they are often justified in terms of the ‘public interest’ work to the disproportionate benefit of organised interests – often the rich or relatively rich – and at the expense of the unorganised and often relatively poor.
One area of public policy where this pattern is particularly evident is that of urban planning. In the United States, as Jane Jacobs showed so powerfully, the subsidised construction of luxury hotels, civic centres and highways has often paid precious little attention to the fate of the people and small businesses that have been ‘relocated’ to make way for politically high profile ‘regeneration’ schemes. The principal beneficiaries have often been large scale property interests who secure access to land on terms that would not have been available in a free market. In the United Kingdom meanwhile, large scale ‘slum clearance’ programmes in the post war era saw hundreds of thousands of low income people ‘relocated’ to high rise blocks – a process which often destroyed local community support networks but secured jobs for thousands of middle class local government housing managers and for large construction contractors which built what turned out to be some of the worst urban housing projects anywhere in the developed world.
As well as crimes against the poor in the name of urban renewal, urban planning has often prevented low income people from accessing housing in suburban and semi-rural areas where new and better paying jobs have been created. The primary culprit here has been restrictive zoning regulation – and in the British context the creation of development free ‘green belts’ around major towns and cities (now imitated by some US cities such as Portland). The effect of these controls has been to restrict the supply of land for housing forcing up the price well above free market levels. The major beneficiaries are of course existing home-owners in areas of high housing demand who benefit from increased property values and who use land use regulation to keep out ‘less desirable’ residents. In the UK specifically many analysts have pointed to a ‘drawbridge effect’ where the middle classes move out of the cities to rural and suburban areas and then promptly demand tougher regulation to ‘keep out’ the less well-heeled and the new building that would be needed to house them. Similar processes operate in the US where ‘large lot’ zoning ordinances that mandate minimum lot sizes of several acres in many states have been used to maintain neighbourhood exclusivity.
These predominantly middle class motivations are reinforced by the gains that flow to corporate housing developers who use urban planning regulation to reduce competition. Corporate developers favour a system which provides permission to develop their own land while affording opportunity to restrict access to land for their competitors. Smaller firms in particular tend to be squeezed out of the market owing to their relative inability to afford the expenses and legal fees needed to lobby effectively to secure development rights through the political process. The effects of this phenomenon have become particularly pronounced in the UK where the ‘self-build’ sector has been almost entirely eradicated. Individuals who might want to build their own homes or contract with a small developer often can’t afford the expense of going through the planning process themselves and must rely instead on the corporate sector.
Of course, to point out the pernicious effects of urban planning controls, is not to suggest that there is a case against all such controls. If we want to protect open spaces and other environmental assets then land use regulation has a role to play – but much of this can be provided privately and need not operate in a zero-sum manner. Homebuyers who value open space protection and other environmental controls, for example, may purchase developments with restrictive covenants or contract into private communities which impose land use restrictions on plots within their domains in order to maintain neighbourhood integrity. In these cases middle class homebuyers have to compete directly in the market with those who value land in alternative uses (land without housing controls) and are faced with the cost (via higher prices) of the level of regulation they demand.
All the evidence suggests that the demand for environmental protection is closely related to income. The rich and the middle classes have a stronger preference for land use controls than the poor. What state enforced, as opposed to private urban planning enables them to do, however, is to secure access to environmental quality ‘on the cheap’ and to do so at the direct expense of lower income groups. When those on middle and higher incomes have to pay directly for the right to regulate land via private contracts then they will tend to demand less of the relevant regulation overall. By contrast, under a state-directed system, middle class groups wanting more restrictive controls can simply lobby the political authorities for ever more restrictions on other peoples’ property. Because they do not face the full opportunity cost (higher prices and fewer homes for those on low incomes) of the policies they support, an excessive amount of regulation is demanded.
The effects of urban planning referred to in this post have been documented by academic analysts on both the ‘left’ and the ‘right’.* Virtually all of the studies conducted in the UK, USA and in many other countries confirm that government-led urban planning redistributes income and opportunity away from the poor and towards the middle class and the rich. The big question that needs to be asked is why, in light of this evidence, so many British ‘socialists’ and American ‘liberals’ who profess to be concerned about ‘social injustice’ continue to support it.
*‘Left of centre’ analyses of these effects include Logan and Molotch (1987) Urban Fortunes, University of California Press. Pahl (1975) Whose City? Penguin. (1975) Hall, P. et al (1973) The Containment of Urban England, London: Allen and Unwin. My own earlier work analysed these effects from a public choice perspective – see Pennington (2000) Planning and the Political Market: Public Choice and the Politics of Government Failure, London: Athlone/Continuum.