Historical Context and Background

RE 5002: Legal and Institutional

Framework ƒ In Europe and the UK, the financial crisis of the
late 1960s, the oil crisis of 1973 and the ensuing
Real Estate Development recession - all exposed another underlying
weakness of the planning system - its
Seminar 3: Planning and dependence on economic growth.
ƒ The development plan system has all along been
Markets based essentially on state regulation of private
sector development.
M.Sc (Real Estate) 2005-2006 ƒ Where the state undertook development, this
Lecturer: Dr Malone-Lee Lai Choo was mainly the provision of physical and social
infrastructure (roads, schools, etc), or else it was
in partnership with the private sector.
ƒ Consequently, when economic crisis pushed the
private sector into recession, there was little left
to plan for.
August 2005 Malone-Lee Lai Choo

The rise of the anti-planning Leveraging the Private Sector

movement
ƒ by the end of the 1970s, conventional planning, the use of plans ƒ The parallel development in many
and regulations to guide the use of land, seemed to be more and parts of the United States was that
more discredited, as planning turned from regulating urban growth, planning was attacked as having The concept was of
“leveraging the private
to encouraging it, on the premise that planning must facilitate the distorted and inhibited the sector” means using
operation of market forces, forcing
creation of wealth in the cities. industrialists to take sub-optimal
relatively modest public
funds to generate a
ƒ This anti-planning movement which started in the United States, location decisions and even much larger amount of
was to be followed by Britain. throttling enterpreneurship. private investment.
ƒ By the late 1970s, in all the great British cities, large tracts of vacant ƒ Thus, many urban revitalisation Mainly in the form of
projects took place based on a new large developments
or semi-vacant land, ruins of derelict industrial or warehouse based on the relatively
buildings were found all over Britain. kind of creative partnership new concept of adaptive
between the city government and re-use, i.e., the
ƒ The main concern then was no longer for the traditional control the private sector - with support rehabilitation and
and guidance of growth (since 1947) but for the encouragement of from central government in terms recycling of old physical
growth-promoting activities “by almost any means”. of public support and joint funding structures to new uses..
(the new role of public sector
investment in speculative
enterprise).
ƒ
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“Rousification” of American Cities London Docklands

ƒ Urban revitalisation: the American buzzword of ƒ Large tract 8.5 sq miles
the 1980s – a new kind of creative partnership ƒ “Planning as Property
Development”
between the city government and the private ƒ The task of planning was to
sector. facilitate the most rapid
ƒ James Rouse, Baltimore developer - large feasible recycling of derelict
urban industrial or
schemes (Baltimore : 250 acres) mixed use, big commercial land to higher and
federal commitment (public sector speculative better uses.
investment enterprise, coupled with federal ƒ The LDDC took unprecedented
powers away from local
grants, and public-private co-operation) authorities, and used them to
ƒ Examples: Boston Waterfront welcome developers with
open aream
ƒ Inner Harbour of Baltimore
In a mere 5 years, it had
used £279 million of public
funds to attract nearly six
times that amount in private
investment; attracted 400
new companies and 8000
new jobs; provided sites for
nearly 4000 new homes, with
10,000 under construction or
planned; and had begun
work on a major new light
rail system.

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Planning as “property development”
ƒ Planning became almost synonymous with
“property development, the task being to
facilitate the most rapid feasible recycling
of derelict urban industrial or commercial
land to higher and better uses.
ƒ The style was basically ‘anti-long-term
strategic planning, anti-almost-any
published plan at all; freewheeling,
freebooting; ……..concerned only to
exploit opportunities as they arose. . . it
was not planning as anyone had ever
understood it for the previous forty years.’
August 2005 Malone-Lee Lai Choo
Revival of Privatism
Privatism is defined as a tradition that
encourages a reliance on the private sector
as the principal agent of urban changes,
stressing on the social and economic
importance of private initiative and
competition, and legitimising the public
consequences of private action, with the
fulfilment of both personal and community
well-being being evaluated largely in terms
of the fulfilment of private aspirations and
the achievements of private institutions
(Barnekov 1988)
The New Mandate for Cities
ƒ Establish economic development as the central
focus of local attention and as the basic function
of local institutions, stimulate new public-private
sector alliances, and abstain from public actions
which distort the efficient operation of the
marketplace or constrain the locational choices,
investment decisions, and operational plans of
firms
ƒ The prosperity of cities, it was propositioned,
depends on effective competition for industry,
jobs and investments in a dynamic national
economy that is shaped largely by the spatial and
sectional needs of private enterprise.
August 2005 Malone-Lee Lai Choo
In the UK…
ƒ In various parts of Britain, the concept of
enterprise zones was introduced from Enterprise Zone:
1980, ‘based on fairly shameless free
enterprise’ and bureaucracy being ‘kept to
Zones with
especially
the absolute minimum’ favourable tax
ƒ concessions and
ƒ Indeed, it has been said that since 1979, a simplified set of
physical planning
the Thatcher government have all but
abolished planning, with the relaxation of procedures.
many controls, the introduction of
enterprise zones and simplified planning
zones, the transfer of powers to urban
development corporations and the greater
stress on market criteria in development
control decisions.
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4 new policy dimensions for cities
1. in virtually all areas domestic activity, priority was to be
given to economic considerations and the requirements
for market efficiency;
2. Wherever possible, private markets were to be relied upon
in preference to public policies in making allocative social
choices;
3. Where public intervention was necessary, it was to be
designed to augment market processes and to elicit the
greatest possible private sector participation;
4. When direct public programmes were undertaken, they
were to be organised in a manner that corresponded to
the administrative, financial, and evaluative methods of
the private sector.
August 2005 Malone-Lee Lai Choo
The Remaking of Planning not the
death of planning
ƒ By the end of the 1980s, it would appear that
urban planning as originally conceived as a
government-led activity to guide land use and
development has to be conceptually remade given
the political and economic climate of the times.
ƒ The ‘crisis’ in planning and the context in which it
was operating in the 1970s has resulted
effectively in the ‘remaking’ of planning involving
a re-orientation of its goals and purposes on new
approaches which were more in-tuned to the
market and the interests of developers (Brindley
et al., 1989)
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 A New Typology Of Planning Styles
Perceived Nature of Urban
Problems
Buoyant Area:
Minor Problems and Buoyant
Market
Marginal Area:
Pockets of urban problems and
potential market interest
Derelict Area:
Comprehensive urban problems
and depressed market
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Market-Led vs Market-Critical
Attitude of Market Processes Approaches
Market-Critical Market-Led
Redressing imbalances Correcting
ƒ Market-led approaches are those that take a positive
and inequalities created inefficiencies while view of the market, and the market mechanism
by the market supporting market determines where and when development should
processes occur, the main actors being the private sector.
Regulative Planning Trend Planning
Where market outcomes are judged to be inefficient,
additional planning powers are brought into play to
Popular Planning Leverage Planning correct inefficiencies.
ƒ By contrast, market-critical approaches take a
positive role to redress the inequalities and
Public-Investment Private-Management imbalances of the market and to make good its
Planning Planning omissions by measures to increase the access of the
disadvantaged to housing, health, recreation and
community activity, in the pursuit of the more
generally defined goals of community welfare.
Malone-Lee Lai Choo August 2005 Malone-Lee Lai Choo

The trends then….

Three types of areas….
ƒ Given prevailing political
climate, it has been Simplified Planning Zones:
ƒ Based on the typology, in more prosperous areas, planning suggested that market-led Concept to promote a free
of a negative kind is considered most appropriate, and styles will increasingly market environment in
planning styles are concerned with reacting to private dominate planning policy in designated urban areas by
reducing taxes and relaxing or
development initiatives, not with actively encouraging the 1990s in the UK. Eg. eliminating regulations on
them, through regulative and trend planning. trends toward more flexible business activity. The concept
ƒ In marginal areas where a greater degree of positive approaches such as the use epitomise a government’s faith
planning which stimulates change and growth and facilitate of Simplified Planning Zones that unfettered entrepreneurial
restructuring of the local market, either popular planning is – capitalism would eliminate
effected through the community or leverage planning is
used using the private sector as the main agency for
ƒ and new Use Classes Order urban problems, produce jobs
change. (e.g. the new B1 use and internationally competitive
classification of mixed products, and create
ƒ In derelict areas, there is shift toward a totally planned
local environment, either through public-investment
buildings allow anything harmonious and industrious

initiatives or on the other extreme, relying totally on private from 100% office communities.

sector efforts. development to 100% light

industry.
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Planning vs Markets – an
The New Approach
institutional analysis approach
ƒ Implies that planning and markets are
ƒ Currently, the new approach combines deference separate, opposed and mutually
to market forces with a package of limited exclusive
planning controls and public subsidy.
Planning
Private enterprise
ƒ It focuses on areas where development is likely to Government Hybrid forms
be most profitable, and leaves less commercial intervention, state Unplanned market
locations to ‘the rhetoric of the moral planning regulation and action
movement’ which continued to rely on
paternalism and community activism to achieve ƒ Institutional economics or institutional
urban changes. analysis has modified the simplistic
assumptions of classic economics
ƒ Planning is not limited to public sector,
nor do markets exclude planning
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Institutional Analysis
ƒ Rather than juxtapositioning planning and
markets, both are subsumed under the
more overarching concept of governance.
ƒ The question is no longer “to plan or not to
plan” but “What is the most effective form
(or mix of forms) of governance?”
ƒ This should be raised in the context of a
policy issues or problem
Transaction Cost Theory
ƒ The basic unit of analysis is the transaction: any exchange
between parties, from simple exchanges of goods and
services for money, to other transactions involving the
promise of action of value by one party in exchange for
money, goods, services or other valued resources, or for
promise of reciprocal action of economic or other value.
ƒ In Institutional Analysis, TCT applies the principle of
remediability, ie. it compares alternative feasible form of
governance, rather than referring to some hypothetical
idea.
ƒ TCT prescribes discriminating alignment: matching the
transactions involved and their specific attributes, with
alternative governance structures, to see which offers the
lowest transaction costs for all participating actors.
The most appropriate form (or mix) of governance is the
one that minimises all concerned parties’ transaction costs

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Forms of
Govern- Third Party Governance Bilateral Governance (market support)

A Transaction Cost Theory of ance:

Agent:
(Adminstrative Support)
Public/Govt Private Public/Govt Mixed Private

Planning (Delegated) (public/

Private)
(Firms/Corporations

Planning Statutory Public Professional Public developer- Public- Developer-initiated

ƒ Public land use planning and development control Planning (govt consultant planner Private planning

can be defined as “government delineation and

agencies, firms (government/public Partnership Informal Planning
bureaus) agencies)
/or restrictions of rights over land with certain Indicative
spatial confines” Planning: (public
planning &/or
ƒ The assignment of and control over land uses will delegated
generally reduce transaction costs, and can create consultants)
Infrastructure,
or enlarge markets, but recognising planning and public
development control as part of the market’s facilities/open

institutional environment still leaves the question space, indicative

designation of
open: “Why public?” is it not possible to private land
substitute voluntary compliance and enforcement uses/intensities

for parts or all of the regulatory institutions of Develop- Regulatory: Contract zoning: Contractual: CCRs

governmental intervention in the land

ment (government/ Plan as a condition between
Control public agency) of contract of lease developer/planning agent
development process? Zoning, building or sale between and subsequent property
regulations, other public landowner owners
(environmental, and developer
harzard, special
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area designation,
etc)

Third Party Governance Bilateral Governance

ƒ The question of “make” (in-house
provision of professional planning services
by a government agency) or “buy” would
be addressed on a case specific basis.
ƒ “Buy” can include privatising forward
planning activities through procurement
from consultants, and monitored
delegation of governmental regulatory and
enforcement activities such as plan review
and building inspection to private service
providers.
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ƒ Planning in bilateral governance involves
deliberate intervention in the land
development process.
ƒ This can be done directly by government
and its agencies, or through public-private
partnerships, which have become popular
development instruments over the last
two decades.
ƒ It is, of course, also extensively done in
the market itself, by large-scale
landowner-developers
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 Indicative Planning
ƒ Indicative planning is a form of bilateral governance where
government does not intervene directly but provides
indirect market support.
ƒ Indicative plans show public investments (infrastructure,
strategic facilities and public amenities) and indicate
desired patterns of area development.
ƒ An indicative plan needs private investors’ confidence in
government’s commitment to implement its own decisions,
and in the quality of its data.
ƒ Its success also depends on how it incorporates market-led
development that would occur in any case.
ƒ To the degree that it is normative, prescribing development
contrary to expected trends, an indicative plan must be
supported by a political community of interests or be
supplemented by other implementation tools
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Developer-Sponsored Planning
ƒ On large privately owned tracts, developer-
sponsored planning can link with voluntary
development control in the form of contractual
convenants and restrictions (CCRs).
ƒ Though these are popular in North America, they
are rarer in Europe, and are almost unknown
elsewhere.
ƒ Evaluations of their success are mixed and raise
many contextual considerations, which are
undoubtedly relevant to their transferability.
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ƒ The overall analysis reveals alternative forms of
governance.
ƒ In bilateral governance, various forms of planning
and development control exist as administrative
and market supports in the market.
ƒ Non-statutory planning ranges from public
agencies planning in developer roles, through
public indicative planning and public-private
partnerships, to developer-sponsored planning of
new communities and large-scale tracts.
ƒ Development control that is in and by the market
includes contract zoning and contractual
covenants.
None of the above fits the simplistic
dichotomy of planning and markets
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Contractual Development Control
ƒ The bilateral governance alternative to
regulation is contractual development
control, which takes two forms:
ƒ When the state is the landowner, contract
zoning ensures implementation that
conforms to public plans. Examples
include Hong Kong’s long leasing of Crown
Land, The Netherlands’ Municipally
acquired and prepared developments, and
Israel’s management of public lands.
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Conclusion
ƒ The institutional analysis of the land
development and real-estate sector
illustrates the fallacy of juxtaposing
planning and the market
ƒ It is only in third-party governance that
we find land use planning outside and
complementary to the market. Here
planning and regulatory development
control are conceived as sovereign tasks,
becoming part of the land and property
markets’ institutional environment.
August 2005 Malone-Lee Lai Choo
Discussion 2: En Bloc
Redevelopment in Singapore
ƒ Examine the en-bloc sales phenomenon in
Singapore.
ƒ Do what extent does this phenomenon
demonstrates that private sector initiative can
bring about urban changes that are in alignment
with planning objectives?
ƒ What are the institutional pre-conditions to the
successful initiation, implementation and
conclusion of such efforts at “private urban
renewal”?
August 2005 Malone-Lee Lai Choo