Martin Wolf in the FT has excellent op-ed on British land use policy:
Here are two facts about land use in England: houses and gardens occupy just 5.9 per cent of available land; and land with permission to develop can be worth 100 times as much as land without it. The notion that there is a shortage of land for additional housing is ludicrous. Moreover, the planning system is much the biggest market distortion in the economy: it is throttling supply, to the benefit of homeowners, who have made huge unearned gains.
…Almost all the debate is cast in Soviet terms: “need”, not demand, and numbers of units, not prices. But market signals are telling us that the public wants more land in residential use, which is vastly more valuable to them than in its main current use, agriculture; 63 per cent of land is currently farmed, while all developed land, plus gardens, plus outdoor recreation, is a mere 15.3 per cent. Moreover, 84 per cent of the UK’s population lives in urban areas, which must generate a still bigger share of gross domestic product. The share of farming in GDP is 0.61 per cent: economically, it is a hobby.
…Opponents will insist that the amenity value of open land is overwhelming. Really?…The idea that we have no land left for houses or that every bit of farmland has imperishable amenity value is absurd.
In the industrial revolution millions of people moved from the countryside to urban areas and cities grew to house them. It wasn’t always pretty but it worked. Especially since the 1970s, however, we have regulated cities so they can’t build up and made it more difficult for land to move from rural to urban uses thereby freezing old systems in place and reducing dynamism. The story varies a little depending on whether we are talking about Portland, San Francisco, Toronto, New York, Mumbai, or London but in broad measures it is remarkably similar around the world.
Addendum: Canada, The Second-Largest Country In The World Is Running Out Of Land illustrates the point.