Friday, 9 January 2015

Planning "a control system of baroque complexity"


Spot on from Martin Wolf in the FT:

The restrictions on land availability are man-made. They are due to a control system of baroque complexity that has not only constrained supply, but, far worse, has created a set of powerful vested interests in its continuation. Among those interests are local residents, homeowners in general and the banks that finance them. In a genteel British way, this is a corrupt arrangement whose result is to benefit the haves at the expense of have-nots. It is supported by pressure groups, such as the Campaign to Protect Rural England, which I think of rather as the Campaign to Contain Urban England.

The problem is however that, while a government could simply wave its wand and scrap the planning system - or at least its most egregious parts, we don't know how this would affect the economy. Would a surge in housebuilding from newly liberated builders result in a dramatic and sustained reduction in house prices? And how many people would find themselves in that dreaded negative equity as a result? Or would the change be more gradual with a decline in prices spread over a longer period?

Right now politicians - all of us - are wandering around with our fingers firmly stuck in our ears singing 'la la la' to keep out any sane voices telling us to change the planning system. On the left the response is to propose rent controls of one sort or another and to argue for huge subsidies to a privileged group of housing developers (housing associations and the like) so as to cover up the gap between rents and development costs. For Conservatives the answer lies in a mystical thing called 'brownfield' land again made developable only through a different tranche of government subsidy.

For the industry, built as it is on the presumption of limited land releases and sky high land values levered to provide development finance, the end of planning is also a huge threat. Our national housebuilders are creatures - strange deformed rent-seeking creatures - of the planning system. Without the limitations of supply we wouldn't need the big developers as people would simply buy some land - prices would be much lower - and build a house. Local builders would see the chance to build small developments to meet local demand. And more attention would go to build quality and space standards than to getting the most from exorbitant land prices.

The planning system represents the worst of all worlds. For politicians who are forced to make decisions that they would rather not make - 'releasing' land to those big builders. For the developer there's the pressure of development costs, the tying up of valuable capital in five years of land bank and the balancing of saleability with profitability. And worst, for the next generation - especially in the south of England - there's the prospect of either a tiny flat in a slightly unsafe East London suburb or a life spent (at great expense) almost entirely at the mercy of the railway system. That or a life spent in unsecure rented property.

This isn't a question of 'reforming the Green Belt', developing a national housing strategy or using great dollops of government borrowing to bail out housing supply problems. That sadly is what Wolf proposes - it's not radical. The truth is that to get the change Wolf wants (and to borrow a phrase from P J O'Rourke) we need to take the 1947 Town and Country Planning Act and all its descendants round the back of the barn and kill them with an axe. That would be radical.



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