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Rent Seeking at the Planning Department

by Emily Washington on May 12, 2009

Like many cities the world over, Sydney, Australia has recently had to endure budget cuts. During this process, the city’s Planning Department required all of its senior executives to reapply for their positions. The selection of new leadership created an ideological shift within the department, according to some staff members, when three of the Department’s former executives were not rehired. As reported in the Sydney Morning Herald:

All three [new] executive directors in the department have worked for the former planning minister Frank Sartor, and were seen as close to him. Mr. Sartor was dumped from cabinet last year and replaced in the planning portfolio by Kristina Keneally.

“It’s appalling, it’s disgraceful and it’s a highly retrograde step,” said one well-placed planning source who did not wish to be named. “The three people who are going are really good quality who are well-respected in the industry and have been replaced by others who are more malleable.”

This threat of industry capture could have severe consequences for Sydney if builders rather than the market are permitted to determine which business enterprises belong in a given neighborhood. Rent seeking from urban developers is commonplace here in the U.S. as well.  As Jane Jacobs writes in her seminal work The Death and Life of Great American Cities, when one developer is allowed exclusive rights to commercial businesses in an otherwise residential area, the negative outcomes associated with all state-sponsored monopolies will result: shoddy performance and high prices on the part of firms protected from new entrants.

Diversity of design and use will naturally occur in places where entrepreneurs are free to compete to meet the demands of cities’ and neighborhoods’ residents, but these efficient land uses can be stifled if municipal authorities exhibit cronyism or are subject to lobbying from builders.

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