Policy Study

Market Oriented Planning

Principles and Tools

Executive Summary

Under urban planning in the United States, virtually every major development is subjected to the vagaries of the rezoning process and the uncertainties associated with legislative review by planning boards and city councils. In many cases, the planning process creates unnecessary costs and delays and inhibits investments in land as communities evolve over time.

Surveys of the impact of zoning and other land-use controls suggest local regulations add 20 to 30 percent to the cost of housing. Moreover, planners are so absorbed by process and implementation that they spend little time on larger, strategic issues. A survey of 178 California cities, for example, found that landuse permit-processing and rezonings account for almost 60 percent of planners’ time. They spent less than 10 percent of their time in general plan preparation. Moreover, modern planning has spawned an unbounded politicization of decisionmaking regarding land use.

Twenty-first century planning will need to incorporate the evolutionary and dynamic aspect of communities to be successful. This implies accepting and integrating the fundamental role markets play in allocating resources in a market economy.

Urban planning and land-use regulations need to adopt market-oriented principles and concepts that build upon a vision of communities as constantly evolving. Planning processes need to recognize the role markets play in meeting consumer expectations and preferences. And, planning practice must limit the politically arbitrary nature of development approval, moving toward a common law, nuisance-based standard for regulating land development. The focus should be on those directly and tangibly affected by the proposed development.

Several practical recommendations flow from these general principles. Specifically,

  • Planning should include a presumption in favor of property owners, requiring public hearings only if parties directly affected by the project identify tangible impacts on their interests. This approach does require that developers properly notice neighbors of proposed developments.
  • Local planning decisions should be protected from regional or state interference unless a clear public interest exists or regional spillover effects are not addressed in the proposed plan.
  • Developers should be expected to modify projects to minimize negative impacts, but these impacts should be tangible and measurable.
  • Planning boards should adopt zoning districts that accommodate a large number of uses to facilitate changing needs.
  • Cities should adopt administrative review processes that set forth clearly defined criteria for what is acceptable by local planning boards.
  • Property owners and developers should bear the costs of property development, including infrastructure directly associated with that development. However, property owners should be given latitude to determine what kind of infrastructure is appropriate.
  • Standing in public hearings should be limited to parties clearly and directly affected by a proposed development.
  • Development approval should be based on a set of clearly defined and stable rules, rather than on prescribing specific land-use outcomes. Stability can be enhanced by requiring a supermajority to modify planning board decisions and by requiring pre-application meetings.

Planning that relies on end-state prescriptions and unbounded political intervention into landowner choices, even where tangible impacts are not apparent, is both costly and incompatible with dynamic economies. Market-oreinted planning offers both greater predictability and greater flexibility so that communities can evolve as economies and consumer preferences change over time.