In general, there should be no planning restrictions regarding the height, size and location of new buildings in central London.

Presenter: Abel Schumann
Date: 13/1/12

House prices in London are among the highest in World. Nevertheless, large parts of the city are dominated by fairly low-rise developments. This is arguably due to planning regulations that limit height, size and location of new developments. By keeping the supply of housing and office space artificially low, these regulations inflate house prices and cause welfare losses for a majority of Londoners.

What are the intentions of the existing regulations?

What are the upsides, what are the downsides of increasing population density in central areas of London?

How to deal with the externalities of new high-rise developments?

Which part of existing regulations makes sense from a welfare perspective and which is due to the NIMBY (not-in-my-backyard) effect?

Some stylized facts:

-          Construction costs for residential high-rises of medium to high standard  are about £1300-£2000  per square meter, but average house prices in central London exceed £5000 per square metre.

-          Usually, planning permissions will only be granted if new developments adhere to size and appearance of existing buildings in the neighbourhood.

-          The height of buildings in large parts of London is restricted to ensure unobstructed views of Westminster, St. Paul’s and other landmarks from distant viewpoints such as Richmond Park, Greenwich Observatory and Hampstead Heath.

-          More than 90 percent of Westminster and roughly 50 percent of Camden, Islington, Hackney, City and Tower Hamlets are conservation areas in which essentially no new construction is possible.

-          There is a general height limit of 1000 feet for all buildings in London.

Links:

Glaeser et al. (2004): Why is Manhattan so Expensive? Regulation and the Rise in House Prices (http://www.economics.harvard.edu/faculty/glaeser/files/Manhattan.pdf)

The London Plan (general planning guidelines for London) (http://www.london.gov.uk/thelondonplan/introduction/)

The Camden Planning Guidance as an example for existing planning regulations (see especially points 2.10, 2.13, 2.14 and 2.15 for the dimensions of new buildings) (http://www.camden.gov.uk/ccm/cms-service/download/asset?asset_id=2694288)