Sunday, 8 September 2019

The planning system is a big reason for Britain's sluggish economy - reform it

This can't be said to often - we have a dysfunctional planning system that sits right at the heart of our economy's sclerosis and underperformance. If you want places to grow and succeed you need to sort out the planning system, especially for housing.

From Sam Bowman and Stian Westlake:

The undersupply of housing, whose root cause is a dysfunctional land use planning system, is the UK’s biggest problem. It slows productivity growth by preventing people from moving to get better jobs, forces them to spend more on housing costs than they need to, and to have fewer children than they would like, at a later age than they would like. It creates a brain drain from deprived parts of the country, because only the most talented people can afford to move to prosperous cities, exacerbating regional inequality, and means that many of the income gains from the slower productivity growth we do get accrue to existing landowners in the form of higher rents and housing costs, instead of higher living standards for everyone.
Despite this, every political party is proposing housing policies that at best change none of the fundamentals and at worst will completely destroy the last vestiges of a functioning housing market. The Labour Party talks about rent controls, right-to-buy for private rentals and more vaguely about building lots of council houses. While the latter might help a little, it doesn't address the real issue which is that younger people in productive cities cannot afford to buy a house - or, for that matter, a converted airing cupboard pretending to be a studio flat. Labour's policies would see the complete collapse of the private rented market, a massive increase in homelessness and no increase in the rate of build for market housing and they remain completely wedded to a 'plan and provide' approach that simply doesn't work however much you tinker with it.

For the Conservatives, wedded as we are to the ideas of classical liberal economics, it ought to be simple - make lots more land available in places like Surrey, Hertfordshire, Berkshire and Buckinghamshire for people to build homes on. Instead we're either (and Bowman & Westlake fall into this trap) proposing massive densification as the solution - huge blocks of flats near to suburban railway stations - or else using false incentives like Help to Buy. Think-tanks like Onward have engaged in massive contortions to come up with housing policies that don't change the fundamentals of our planning system - indeed while they mention planning they hide behind opinion polling showing planning reform is unpopular to ignore the damage it is doing.

There are 118 golf courses in Surrey each of which could provide between 2,000 and 3,000 homes at suburban densities - just having 98 courses would allow for 60,000 new homes. We can then consider redundant airfields and other previously developed land as well as stopping the ridiculous block on what got called 'garden grabbing' where houses on huge single plots (something there's plenty of in the Home Counties) get redeveloped at more normal suburban densities of 20-25 homes per acre. To achieve this you don't need to scrap the 'green belt' you just change the rules to mean that previously-developed land (including those golf courses, gardens and airfields) falls outside those green belt protections unless there are exceptional reasons otherwise.

The second change to planning would be to alter the basis on which assessments of housing need are made. These "objective assessments of housing need" (OANs) are a core reason for our delivery problems. Supposedly these assessments are made on the basis of projected population growth adjusted to acknowledge economic factors (these are always upwards - nowhere admits to their local economy shrinking). The problem is that OANs point to a precise number for housing need - 43,500 for Bradford - and planners therefore identify and allocate a similarly precise acreage of land on which those homes will be built. In areas with growing demand, all of this will be developed meaning that there is no market for development land and the constrained supply - just the bits the planners have shaded in - results in higher land prices than would be the case if, for example, planners identifed land to meet twice the OAN housing number.

Finally we need to review the basis for green belt policy. If we hold to the five reasons set out in the National Planning Policy Framework (NPPF) there is no reason why the scale of Britain's green belts cannot be substantially reduced while still preventing the merging of communities, discouraging unmanaged sprawl, protecting the environment and encouraging the re-use of previously-developed land. We also need to get away from the foolish and expensive obsession with building new towns and new villages rather than extending the towns and villages we already have. Existing places already have the physical and social infrastructure of highways, hospitals, schools, water, sewage treatment and things like pubs, post offices, shops and parks. These existing places are also linked into existing rail, bus and urban transit networks.

I recall listening to the Leader of Lincolnshire County Council explaining how the main barrier to delivering some of the county's big sites was that the service undertakers (electricity, gas, water, etc.) didn't have the resource or investment finance to get the new towns 'wired up'. If, instead of this, the focus was on smaller urban extensions most of these problems would be managed more easily.

The UK's housing policy is a mess and this is entirely the consequence of policy-makers ignoring the simple fact that it is the planning system that causes most of the problem. This isn't to say we shouldn't have more social housing or that there aren't arguments for reforms to how the private rental sector operates but most of Britain's housing problem is people who want what their parents had - a nice house and garden is a decent suburb connected to 'town' where they can raise a family.



Shiney said...

"For the Conservatives, wedded as we are to the ideas of classical liberal economics"

Not sure that is true any more, if it ever was.

Anonymous said...

Or just have fewer people . . . .

Anonymous said...

Hear, Hear, Simon!

Well said.