Planning policy, housing density and consumer preferences

Due to a combination of government planning policies and market pressures in England in the period 2000--2008, there was an increase in the construction of flats and high-density developments and a decline in the construction of houses. In this paper, an analysis of the effects of these policy constraints is undertaken. Using hedonic pricing models, we test for a non-linear relationship between house prices and residential density in England. Consumers prefer houses over flats and detached properties over semi-detached and terraced (i.e. lower density suburban areas). However, both low-density, detached-dominant areas and high-density, flat-dominant areas attracted a premium over medium density areas and the relative size of these price differences vary between different housing market areas. In cities outside London, we consistently see a convex relationship between price and density, whereas a concave relationship between price and density is consistently observed in London. This suggests a different form of relationship between density and house prices in large urban conurbation areas, compared to more typical provincial cities. The conclusions we draw are that in the correct context, high density may be viewed positively but a single planning policy is not appropriate and it should be tailored to suit local market needs.