The economic, social, political and environmental impact of land use regulations in FRANCE By Vincent BENARD Institut Hayek

Housing, public crisis, private care (Nov. 2007)

French Median multiple (Gross revenue) (Figures are a bit higher using net disposable income)

Index of home prices relative to households’ net disposable income – Index 1 : 1965 // 2008 peak: 1,66 to 1,9 -

# of new homes / year Supply reacted with a 6 year lag to demand Demand begins to soar

Construction costs didn’t increase as fast as home prices…

Real estate prices, gross inflation Construction costs : +30 % Home prices : +140% Serviced developable land : +500% (w/ high regional variability) Coastal zones : X 10 and more Cost of land servicing : 15-20€ per square meter of land Cost of serviced land in a typical rural town, 20km from Nantes' Fringe: 1997 : 15-20€ (so most rural developments had to be subsidized) 2007 : € 30 km from Montpellier : 1997 : 30€ : up to 300€

When small lots are nearly as expensive as bigger ones… The regulatory penalty is high Small lotBigger lot price * Regulatory penalty *Costs of land servicing deduced surface

Not only in Paris In red, fastest growing areas Rennes ( ) Nantes ( ) La Rochelle ( ) Toulouse ( ) Montpellier ( ) Vannes ( ) Poitiers ( ) (...)

Consequences of tough land use regulations Housing unaffordability Wealth transfer from middle class to richer people « urban sprawl » containment leads to « rural sprawl » and « rural mess » Ugly urban landscapes out of historical areas Environmental benefits : not so evident Corruption of political life expensive and powerful bureaucracy

1999 to 2006 : rural small cities grew much faster The example of Nantes

Land use corruption, a « serious concern » For the first time, in 2006, official documents point out « land regulation corruption» as a major concern The phenomenon is impossible to quantify precisely. Some lawyers depict it as « endemic » in some regions

Other Environmental effects Ugly urban landscape, because of big social housing programs <== This one is not the ugliest... Natural zones damaged Arsons... When nicely wooded lands are in the process of being classified as « forever undevelopable », these lands are exposed to wildfires... Just a coincidence, of course !

New smart growth utopias ? Two examples of « ideal cities » as smart growth and environmentalists see them... Would you call these... « sustainable » ?

CONCLUSION Knowing all we now know about the effects of zoning regulations, we should take the opportunity of currently falling prices to scrap down all these regulations.... We should enact land regulations that let owners decide what to do with their land Because of falling prices, it's politically easier to do it now But, alas, it's very unlikely to happen

Thank you ! For french savvy people : Institut Hayek : My blog, « objectif liberté » : My Images from : CGPC, INSEE, CODELA, COURLY, Etudes Foncières.