The Economics of Property and Planning: Future Value

231 Pages·2021·4.231 MB·English

by  Graham Squires

The Economics of Property
and Planning
This book introduces the interlocking disciplines of property and planning to
economic theory and practice.
Unlike any other available textbook, The Economics of Property and Planning
skilfully introduces the reader to the interplay between property and planning
using an economic lens. As resources become scarce, there is a growing need for
students to understand the principles of economics in property and planning,
especially given the rapid social, environmental, technological, and political
changes that are shaping places.
The book begins with an outline of key economists and economic problems,
then resources and scarcity, before examining macro- and microeconomic factors
at play in property and planning. Furthermore, this book covers a variety of topics,
including spatial and locational modelling, fiscal approaches to redistribution,
regeneration and renewal, and transport and infrastructure financing. There is also
a particular focus on contemporary issues such as climate change, environmental
limits to economic growth, sustainability and resilience, and affordable housing.
This book also introduces practical evaluation tools and appraisal, plus a look at
property and planning with respect to macroeconomic objectives, policy, and new
directions.
With property and planning essential factors in economic thinking and
doing, this book provides insight into what future places will look like in real
terms and how they will be shaped by policy. Targeted disciplines for this book
include Economics, Planning, Property, Construction, Geography, Environmental
Management, Sustainability, Housing, Built Environment, Land Economy, Urban
Studies, Regional Studies, and Public Policy.
Graham Squires [BA(Hons), PG(Cert)THLE, MA, FHEA, MRICS, PhD] is
an International Economist, Geographer, and Planner with expertise in Property
and Housing. He is the author of six books and has written over 100 peer-review
journals, conference papers, grant-funded reports, and book chapters. He has
lectured in the United Kingdom at The University of Manchester, UWE Bristol,
and Birmingham University. He has been a visiting scholar at the University
of California Berkeley, University of Illinois, and Delft University. Graham is
President-Elect of the Pacific Rim Real Estate Society (PRRES), and council
member of the New Zealand Association of Economists (NZAE). He is a Fulbright
Scholar, CEO of The Property Foundation, and Member of The Royal Institution
of Chartered Surveyors (MRICS). Graham is currently a professor in the School
of Economics and Finance, Massey University, New Zealand.

The Economics of Property
and Planning
Future Value
Graham Squires
First published 2022
by Routledge
2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN
and by Routledge
605 Third Avenue, New York, NY 10158
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2022 Graham Squires
The right of Graham Squires to be identified as author of this work
has been asserted by him in accordance with sections 77 and 78 of the
Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or
utilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in
any information storage or retrieval system, without permission in writing
from the publishers.
Trademark notice: Product or corporate names may be trademarks or
registered trademarks, and are used only for identification and explanation
without intent to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Squires, Graham, author.
Title: The economics of property and planning : valuing future
development / Graham Squires.
Description: Abingdon, Oxon ; New York, NY : Routledge, 2022. |
Includes bibliographical references and index.
Identifiers: LCCN 2021026082 (print) | LCCN 2021026083 (ebook) |
ISBN 9780367629663 (hardback) | ISBN 9780367629670 (paperback) |
ISBN 9781003111634 (ebook)
Subjects: LCSH: Urban economics. | City planning. | Real property—
Valuation. | Real estate development—Planning.
Classification: LCC HT321 .S688 2022 (print) | LCC HT321 (ebook) |
DDC 330.9173/2—dc23
LC record available at https://lccn.loc.gov/2021026082
LC ebook record available at https://lccn.loc.gov/2021026083
ISBN: 978-0-367-62966-3 (hbk)
ISBN: 978-0-367-62967-0 (pbk)
ISBN: 978-1-003-11163-4 (ebk)
DOI: 10.1201/9781003111634
Typeset in Goudy
by Apex CoVantage, LLC
Contents
List of figures viii
List of tables x
Acknowledgements xi
1 Introduction to future value: the economics of property
and planning 1
Introducing the economics of property and planning 1
Relevance and importance 2
Concepts and theory – future value 3
Policy and practice application 5
2 Economists and economic problems in property and planning 8
Origins of economic thinking for property and planning 8
Unpicking economic taxonomies – approaches, schools,
and subdisciplines 9
Classical economics, neoclassical economics, and
political economy 11
Welfare economics 15
Institutional and behavioural economics 16
Environmental economics 18
Economic geography and space 23
Economics in planning 24
Urban economics, regional economics, and real
estate economics 25
Economics in property – contracts, justice, capital, financialisation,
inequality, and modern practice 26
3 Resources and scarcity in property and planning 30
The basic economic problem 30
Resources, wants, and scarcity 32
vi Contents
Choice and opportunity cost 33
The production-possibility boundary 37
4 Microeconomics: market forces and markets 42
Microeconomics 42
What are market forces? What is a market?
Housing and land 43
The market and efficiency: demand, supply, and equilibrium 46
Elasticity 55
5 Macroeconomics in the economics of property and planning 63
Macroeconomics 63
Macroeconomic objectives and measures 64
The open economy 73
Aggregate demand and supply 74
Capital goods and flows 75
Globalisation 77
6 Spatial and locational approaches in the economics
of property and planning 80
Location theories 80
Green belts, urban sprawl, and growth control 84
Density and zoning 85
Agglomerations 87
Brownfield sites and development 87
 7  Market failure, externalities, and efficiencies in property 
and planning 91
Introducing market failure and externalities 91
Revisiting markets, market shaping, and profit
margin motivations 92
Dealing with the cost of ‘free’ environmental resources 93
Externalities in the real world 94
Why markets fail: failure to achieve efficiency and
other social goals 96
8 Housing and neighbourhoods in the economics of property
and planning 101
Housing markets, efficiency, and low demand 101
Labour, employment, education, health, and crime 105
Inequality: poverty and disadvantage 107
Gentrification 109
Affordable housing and housing affordability 110
Contents vii
9 Fiscal approaches and value capture in the economics
of property and planning 121
Subsidies in land and buildings 121
Tax in land and buildings 122
Value capture 128
Tax Increment Financing 130
Joint development 135
10 Infrastructure economics in property and planning 139
Infrastructure funding finance gaps and innovation 139
Bonds in infrastructure projects 145
Transport and infrastructure (connectivity of places) 148
Transit-Oriented Development 149
11 Climate change, environmental limits to economic growth,
sustainability, and resilience 151
Climate change 151
Environmental limits to economic growth 154
Sustainability 164
Resilience 165
12 Measuring value in the economics of property and planning 169
Valuation and measurement as positive and
normative economics 169
Some economic approaches to measuring and valuing property
and planning 170
Cost-benefit analysis 176
Appraisal, assessment, and evaluation 187
Digitalisation 190
13 Policy and new directions in the economics of property
and planning 195
Fiscal policy, monetary policy, and direct policy 195
Policy programmes, acts, and legislation 197
New directions: valuing people and the planet 198
Conclusions – pessimism and optimism 201
Bibliography 204
Index 208
Figures
1 The Malthusian Problem of Population Growth and Food Supply 12
2 Public Housing and Private Housing 38
3 PPB Outward Movement Following Economic Growth 39
4 Production Possibility Boundary (PPB): How Is It Possible to Get
More of Everything? 40
5 The Demand for Goods and Services (as Projects) in Property
Development 48
6 A Shift in the Demand for Property Development (e.g. Non-Price
Determinants of Demand for Housing) 49
7 The Supply of Goods and Services in Property Development 50
8 A Shift in the Supply for Property Development
(e.g. Non-Price Determinants of Supply for Housing) 51
9 Market Equilibrium in the Supply and Demand for Development
Projects 52
10 A Surplus in the Market for Goods and Services 53
11 A Deficit in the Market for Goods and Services 54
12 Price Elasticity of Demand 55
13 Different Representations of Supply Elasticity 59
14 Perfectly Inelastic Supply of Properties 60
15 Supplying Prefabricated Homes in Places With Inelastic Demand 61
16 The Gini Coefficient of Income and Wealth 69
17 Global Market for a Particular Currency 71
18 Units of Capital Goods and Changes in Exchange Rate Value 72
19 The Equation Components of an Open Economy 73
20 The Concentric Zone ‘Burgess’ Model 81
21 Bid Rents, Ceiling Rents, and Concentric Zones 82
22 The Radial Sector Model of Land Use 83
23 Multiple Nuclei Model 84
24 A Longer Term Withdrawal of Rental Property Supply
From Landlords 119
25 Progressive, Regressive, Uniform Tax 123
26 Value Capture Positive Feedback Loop 129
27 The Basic Tax Increment Financing Model in Principle 131
List of figures ix
28 An Inverted U-Shaped Relationship Between Pollution and Per
Capita Income 161
29 Three Pillars of Sustainability 165
30 Supply Increase and Revenue Changes in Crop Yields to Measure
Pollution Control 175
31 The Formula Used for Applying a Discount Rate to a Net Benefit
or Cost 182