Some thoughts on reforming planning to support housing need

With the Mayor of London joining other 'progressive' mayors in places like New York, Berlin and Auckland by opting for rent controls over building houses, we are reminded that every politician is prepared to ignore economic reality in the search for short-term electoral benefit. Since nearly every serious economist says that rent controls are a bad idea, you have to wonder why they are so popular?

The problem - whether in London or San Francisco - is that politics removes the solution to rising housing costs that actually does make economic sense. Rent controls are the inevitable consequence of housing policies directed by the political power of NIMBYs. Here's housing economist Professor Paul Cheshire being interviewed by Ahir Hites, a senior research officer in the International Monetary Fund (IMF) Research Department:

“Britain imposed its first Green Belt in 1955 and now, if re-zoned for building, farmland at the built edge of London has an 800-fold mark-up. There was no secular trend in housing land prices in Britain until the mid-1950s, but after Green Belts were imposed real prices increased some 15-fold. More than houses because you can substitute land out of house production. There is a similar pattern in Canada, New Zealand or the West and East coasts of the United States where policies restrict land supply.”

It's true, and some politicians try to hide behind this, that agglomeration effects in successful cities also provide upward pressure on housing costs (in simple terms people can move to a place faster than you can build homes to accommodate them). But when the gap between population growth and housing supply growth is negative for decades - as is the case in places like London and San Francisco - the result is utterly unaffordable housing. The case against urban containment boundaries, at least in terms of its effect on housing costs, is now as uncontestable as the case against rent controls.

One policy response popular with mayors (and local government in general, at least in the UK) is to argue that the problem isn't that we're not building enough houses but rather that we're building too many of the wrong sort of housing - expensive homes for rich people and especially rich overseas investors. The solution proposed - and the UK's Chartered Institute of Housing rather egregiously supports this - is that enormous amounts of government subsidy, £146 billion they say in the UK, can be used to build homes "to rent or buy through shared ownership".

Now it's probably true that the UK needs 1.45 million new homes building but is it really the case that the only way to do this is through a huge programme of, in effect, building council houses? Yes we need social housing because there are always going to be people who can't afford the rent for whatever reason (and paying full market rates in the private sector is expensive) but the gap in our housing markets isn't social housing but market housing - people who would like to buy a house (like their parents probably did) are unable to do so:

“The cost of a middle class lifestyle has increased faster than inflation. Housing, for example, makes up the largest single spending item for middle-income households, at around one third of disposable income, up from a quarter in the 1990s. House prices have been growing three times faster than household median income over the last two decades.”

While lots of other things from transport to food have been getting relatively less expensive, housing has headed in the opposite direction. Why? Because government has artificially constrained the supply of land, set down an ever more involved obstacle course for developers - just today the UK government added some new hoops, and made the process of buying and selling expensive through taxation and regulation. It's not that all these limitations are unnecessary but that that combining heavy regulation with a deliberately constrained supply can only result in higher housing costs.

The problem is that reforming urban containment policies and green belts is seen as political suicide. Even though I spent more time at planning committees arguing in favour of green belt development, the immediate and visceral response of the people I represented for all those years is still "no we don't want any more houses building". Since the logic of abolishing green belts is not politically possible (even though there are plenty of other protections for places we consider important environmentally, ecologically or in terms of heritage) we have to ask how we improve the availability of land in and around successful towns and cities.

The first option would be to review the reasons why we have green belts - this could be a national review conducted under public enquiry terms with the aim of deciding the principles for a green belt. The five purposes currently are pretty clear but we might want to consider the weight given to the policy - at the moment there is a presumption that there won't be any development unless that development has no impact or else literally cannot go somewhere else (e.g. a quarry). The simplest reform here would be to argue that housing need gets greater weight than green belt, a process that would provide more incentive for councils to allocate land rather than rely on strict green belt interpretations to save them from public opprobrium.

The second outcome of a review could be that the size of green belts could be limited - this could allow for the continued prevention of merging between communities, for example, but allow for more flexible development on the fringes of existing built-up areas (e.g a buffer zone where small scale development is permitted).

A further change might be to look at how housing development is used as a political campaigning lever - by every political party. We could consider, for example, applying the same strictures to representation on planning applications as apply to representations for licencing. Only those people directly affected by a proposed license - essentially immediate neighbours - can make representation to the licencing authority. Furthermore, local councillors and MPs can only make representations in support of someone directly affected. Applying something similar to planning would make organised campaigns against development - especially smaller scale developments - less powerful and would reduce pressure on planners and planning committees while protecting the rights of adjacent property owners.

The biggest weakness in our current planning system is the local plan process. Just consider that Bradford started preparing its local plan in 2008 and still, eleven years later, does not have a completed plan with land allocations. And this is not unique, two of Bradford neighbours (Kirklees and Calderdale) don't have a plan in place and Leeds is driving a coach and horses through theirs by changing the assessment of housing need (aka "the housing numbers"). Elsewhere local plans - even given the legal 'duty to cooperate' - are drawn up on small geographies with scant regard for the needs of neighbours and where one council (Stevenage, for example) can only meet housing need using allocations in neighbouring councils the result is a long-running political scrap.

A reform here might be to lift the planning process (as opposed to the development management system dealing with day-to-day planning applications) up to a county level, make it much more strategic and 'broad brush' and rely on the National Planning Policy Framework (NPPF) and existing land protections and regulations such as AONB (Area of Outstanding Natural Beauty) and flood plain controls to deal with the detail. The expectations on evidence and precision in the current local plan system inevitably leads to delay and also means that most of the time plans are out-of-date by the time they're published.

Our planning system serves us badly but has become - especially around green belts and in the way it makes developers ask for permission - something of a sacred cow. It is time, however, to recognise that it's not enough to keep saying we need lots more housing but then keep responding to essentially NIMBY arguments and refuse developments. Which brings me to my last suggestion one that I've wanted to happen since private pressure on John Prescott resulted in him preventing the redevelopment of Odsal Stadium in Bradford despite universal local support for the development. We should remove the power of the Secretary of State to overturn the decision of a planning inspector or the decision of a local council - this stops egregious backroom lobbying by MPs and gives us the confidence that decisions really are based on the regulations that parliament has approved.

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