These are the slides from Professor Paul Cheshire's presentation. Paul Cheshire is Emeritus Professor of Economic Geography at the London School of Economics.

1. GARDEN CITIES: RESPONDING TO THE
WOLFSON ECONOMICS PRIZE
Land prices, incentives and popularity the economist's perspective: or
Why we really need more houses
Paul Cheshire: LSE & SERC
28th Jan 2014

2. Planning for a Housing Crisis
Planning - 1947 - product of a different era:
For example: socio-economic conditions radically changed
since 1947/51
Real incomes (Real GDP p c - BoE) - up x 3.1:
Population - up x 1.4:
Cars - up x 12.9
1947 Act still sets the fundamental framework
 Development rights expropriated & urban containment
enforced via Greenbelts;
 Plus AONBs & National Parks
 Plus safeguard agricultural land [Scott Report 1942]
Policy intentionally restricting the supply of urban land
& space for & in housing

3. Result of Restricting Space?

4. Residential land values up/lost agglomeration
economiescity growth - so loses agglomeration economies: &
• Impedes
increases price of housing; & makes housing market more
volatile (see OECD Report on UK, March 2011)
UK been densifying
since 1947
Result?
Price of land
represents
foregone
agglomeration
economies!

5. Real Land & House Price Indices (1975 = 100)
Land Price Index
House Price Index
Note: House and Land data f or war years are interpolated.
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Paul Cheshire,LSE August 2009

6. 32,500 ha of
Greenbelt within
GLA: enough to double
construction rate
for 80 years!

7. Source: The Economist
Jan 10 2014

8. Policy plans to ‘contain’
but people choose to behav
in unintended ways
Highly skilled re-locate
beyond the Greenbelt
and commute from all over
Southern England:
Oxford, Cambridge act as
high income ‘dormitories’.
[London’s carbon footprint likely
increased compared to Paris
⇒research!!!]
Similar issue likely with planned
creation of jobs+residential new
settlements

9. MYTH 1: Concreting over England
REALITY: Greenbelts cover 1.5 as
much land as all urban areas; all
urban less than 10%;
MYTH 2: Greenbelt land
environmentally valuable
REALITY: biggest use - intensive
arable e.g. Cambridge 74%
MYTH 3: intensive farmland is
‘green’
REALITY: No access & NET
environmental cost per ha compare parks & gardens!
[Nat. Ecosystem Evaluation, 2011]

10. Reform: Housing is central issue
 Housing demand strongly income elastic – especially for
space inside and garden space
 As real incomes risen this bids up residential land prices
 Greenbelts subsidise ‘horsey culture’ and golf!
 But this bids away cheap land for offices, start-ups, hotels &
retail;
 Central issue – how to find land for housing and make
residential development acceptable?
 Fundamental point: build on low amenity/environmental
quality Greenbelt land –where the land is! Very little needed
 Need to protect environmentally valuable land more
effectively – case of Hoo Peninsula…
http://spatial-economics.blogspot.co.uk/2013_04_01_archive.html
 Restrictions not just bidding up land prices: lead to
price distortions almost at level of late USSR; but
 Valuable price signals of where shortages worst

11. Use Information of Land Price
Discontinuities signals of complex information on both
1. Prices are immensely efficient
demand and supply.
2. Discontinuities in land prices at the boundary of one permitted use &
another - markets are telling us that the higher priced land is in
relatively short supply.
3. Invaluable guidance - not always to be obeyed – often social,
environmental or amenity benefits from preventing a change of use.
4. Need (more effective) public policy to protect National or Urban
Parks, recreation areas and Sites of Special Scientific Interest - good
social & environmental reasons.
5. But as per Land Use Futures (2010) need to allocate land on the basis of
its value – value including amenity & environmental value –
Not on basis of arbitrary designation 60 years out of date (e.g.
Greenbelt)

12. Shortfall of Housing Close to
Catastrophic building in England MAJOR
 Shortfall of house
problem
19 years 1969-1989 = 4,302,270
19 years 1994-2012 = 2,687,040
 Annual build ‘needed’ to stabilise affordability (NHPAU, 2009)
= 237,800 to 290,500 – say 260,000
 So over 19 years = 4,940,000
 Therefore shortfall 1994 to 2012 has been between
1,615,230 and 2,252,960 – almost certainly closer to
2,252,960
 So reform desperately needed
Question is not: will we reform it? but when will we reform it
& will that be before a catastrophic collapse?

13. Build Garden Cities
Garden Cities could be made acceptable1. Enough value uplift to provide both infrastructure &
incentive
2. Make a substantial contribution to housing supply
3. Demonstrate new building can be environmentally positive
4. Provide houses of type people want to buy in locations they
want to live (access to jobs)
 So could be a positive demonstration effect – houses plus
environmental improvement
Against this 3 new Garden Cities might get us at most 750,000
houses: and shortfall is rising by the month.

14. Garden Cities: Where and How?
Some general guiding principles using economic insight
1. Where residential land prices are high & environmental value
low: for example near Oxford and/or Cambridge; in Home
Counties; edge of GLA area;
2. Greenbelt designation not relevant: low environmental/amenity
value relevant; but maybe include an area of threatened habitat
or area of scenic beauty – focus & demonstration;
3. Choose location with access to jobs & low infrastructure costs;
4. Enforce an Impact Fee based on actual costs imposed;
5. Use land price uplift to compensate original landowners &
home owners very generously;
6. Ensure both original and incoming residents retain equity
interest in success;
7. Environmental audit before and 10 years later; see the gain!