Monday, 10 February 2020

Five ways to make our housing problems worse (why Neil O'Brien is dangerously wrong about housing)

Neil O'Brien,MP for Harborough has set out his "five ways to resolve the housing crisis" over at Conservative Home. But before we explain why four of his five ways will have the opposite effect, we need to note the location of Harborough (and a little about its politcs) because this is important:

It's a typical semi-rural and suburban seat south east of Leicester. Oadby and Wigston makes up about half the constituency and is a Liberal Democrat dominated council (24 out of 26 members) on the urban fringe of Leicester. And Harborough District, to complete the picture, has the most expensive housing in the county. And the MP is right there in the mix:
Neil O’Brien, MP for Harborough, Oadby and Wigston, has raised concerns over plans to develop 300 new homes on the corner of Gartree Road and Stoughton Road in Oadby, following a survey of local residents in which 70% voiced their opposition.

The land was earmarked for new homes by the Council in their draft local plan, and a planning application has now been submitted by the Co-op who own the land.
So how does O'Brien plan to fix the problem? Obviously he's starting by whipping up opposition to the development of new homes on land designated as a housing site but he also has a five point plan for all of us (which, it won't surprise you, would mean less development in constituencies like Harborough):

1) Change OAN* and build more in cities

2) Move away from infill to strategic planning

3) Make development pay for the infrastructure it needs

4) Give councils the tools they need to plan

5) Use the tax system to drive up home ownership

*OAN stands for Objective Assessment of Need - what usually gets called "housing numbers"

And O'Brien sets out the detail in an article in Conservative Home. So we'll look at what he says and whether evidence supports his contention that this will help "resolve the housing crisis".

First OAN. O'Brien says this:
"At present, councils have to build enough to meet their “Objectively Assessed Need” (OAN). In practice this means meeting forecast population growth. But the forecast just reflects recent trends.

Instead of saying that the future should reflect past trends, there are strong arguments for preferring more development within cities: it means more walking, less congestion, less pollution and lower energy use."
I'll excuse O'Brien somewhat oversimplifying the OAN methodology (it's not simply forecast population growth) but can't forgive him the mistake of arguing that the answer is to cram more development into cities, largely on the specious grounds that places like Paris and Barcelona are more dense than New York. It's worth noting that this comparison is false since the boundaries of New York as a political entity are much bigger than those of Paris - 302sq miles compared to 41sq miles - a better comparison is with Manhatten which has 27k people per sq km compared to Paris' 21k. And metropolitan Paris is a big sprawling place:
...over the past four decades, everyone's favorite dense core city, Paris, has seen its urban land area expand 55%, while its population has risen only 21%. Today, the geographical extent of urban Paris is more than 25 times that of the ville de Paris.
France has, of course, benefitted from not having strict urban containment policies which has allowed Paris to expand without causing a big rise in rents and house prices. Paris has no 'green belt', a loose planning framework and a development policy design to limit population pressure on the crowded (and expensive) city itself. As a result the urban area (unité urbaine) has a lower population density than New York or London. The result isn't the dense terraces (without parking) that O'Brien and CreateStreets want but recognisable suburbia:

The real story of French housing is that that country hasn't limited development and hasn't had centralised, inspected guesses at housing numbers with the result that housing in France is far more affordable than housing in the UK. France has problems, especially with historic inner suburbs where poor quality housing is sustained by bad landlords, racism and poverty but Paris is simply a bad choice of comparator if you're arguing for urban containment.

And urban containment, even with a comfortingly bucolic titles like 'green belt', is an absolute disaster as housing policy. As long ago as 1973, Peter Hall in 'The Containment of Urban England' was pointing to 'green belt' and other planning restrictions as the main driver of rising land prices:
“perhaps the biggest single factor of the 1947 planning system is that it failed to check the rise in land prices which is probably the largest and most potent element of Britain’s postwar inflation.” They note that the planning system is inconsistent “with the objective of providing cheap owner occupied housing” and that it has imposed its greatest burdens on lower income households.
Despite these findings, urban containment policies continued and, as geographer Wendell Cox from Demographia reports every year, the most unaffordable housing markets are those with the most restrictive urban containment:

It perhaps doesn't come as a surprise to see that Leicester and Leicestershire is now in the list of the world's least affordable housing markets. O'Brien is, in his policy proposals, defending unaffordability by emphasising a renewed focus - a doubling down - on urban containment. Forcing assessments of housing need (OAN) to prioritise urban density would play very well in south Leicester villages with very expensive housing but would do nothing to resolve the housing problems associated with land use restrictions and urban containment.

O'Brien's second argument is that, if we have to build on greenfield sites, this should be done using a thing called "strategic planning" instead of another thing called "infill". Given that (unusually) both Oadby & Wigston and Harborough Councils have adopted local plans, what O'Brien refers too isn't really a matter of good local planning but a reflection of perceived local pressure on "infrastructure" from new housing development. O'Brien hints at this when he says "...infill is the type of development that attracts most opposition. That’s unsurprising: it means building right next to people. And specifically, to people who chose to live on the edge to get a nice view." This isn't about good development or the right choices, it's 'not in my back yard' written as policy.

A while ago I wrote - from 24 years of experience as a councillor - a series of predictabe reasons for objecting to housing developments:

What I don't see, however, is why not having people upset over these things justifies the far more expensive approach of building entire new communities rather than using modest and affordable extensions to existing places. All, we're told funded by s106 payments (a system that will cease to exist once Community Infrastructure Levy rates are adopted - and note that in inner city Leciester where O'Brien wants to cram new housing, the developer contribution to infrastructure is set at zero to encourage regeneration) which will make developers build new schools, health centres, community halls and anything else off the back of housing. Meaning, of course, that the housing will be more expensive.

Most of the villages in O'Brien's constituency would, like the slightly less posh one I live in, largely benefit from a 10-20% increase in housing. Not only would this not really impact on schools provision to the extent of needing new schools (it takes about 500 houses to add a full class of 30 children to a school) but it would help sustain the local pub, post office, chemist and shops. Opposing this because some people might lose a view is everything wrong with how we approach planning and development.

O'Brien's next argument is popular with councils and the planning profession. What is proposed is (although O'Brien doesn't frame it this way) to give councils compulsory purchase powers for housing developments. Essentially O'Brien's cunning plan is to allow councils to buy land at agricultural land values, give themselves planning permission, sell the land to developers and pocket the difference between what they paid and the inflated value. At present, we have a compulsory purchase system in order to ensure that large universal services (highways, rail, water, electricity, etc.) are not impeded by obstructive land owners. O'Brien's proposals completely change the purpose of compulsory purchase - it becomes a de facto (and very extreme) tax rather than a means of securing the land for a necessary project.

What's clear from such an idea is that O'Brien sees forced sale as a means to get 'brownfield' sites developed. What he doesn't tell us is why "derelict land on the site of an old factory" isn't being developed for housing, there's merely a hint that the developer is "sitting" on the land until the council lets it get away without "paying for infrastructure". Bear in mind that, in the parts of Leicester with those surface car parks O'Brien is so keen on, the contribution to infrastructure under CIL will be zero. The reason the land sits undeveloped is that the 'exceptional costs' (land remediation, clearance, decontamination, etc.) mean that the cost of development makes building homes at a reasonable margin - 17-20% is the usual level in viaiblity assessments - infeasible. This is a cost of regulation and planning not a sinister plot by developers to avoid "paying for infrastructure".

O'Brian's final point is an odd one since it seems to suggest that one reason for the drop in home ownership is the rise in private renting. I've a suspicion here that O'Brien has the cart and horse in the wrong order. For sure, cheap finance and a beneficial tax regime made buy-to-let appealling but this was only made possible because there was a big increase in the number of people, especially younger people, who were in the market for rented property. And, where (because of urban containment and other planning constraints) there wasn't enough new supply, the growth in buy-to-let affected the wider market by generating, in effect, new demand. The thing is that, without significantly more new supply, reducing the availability of rented properties only acts to increase rents (and homelessness).

It is good to see us talking about housing and housing policy but completely useless if that policy is predicated on repeating the failed policy of urban containment or giving councils the incentive to pile up cash from compulsory purchase - a recipe for housing crash as connoiseurs of Spanish housing markets will appreciate. We won't get the housing delivery we need without reform to the 'green belt', without accelerating the planning process by granting housing allocations automatic outline permission, and without allowing smaller communities to grow so as to sustain their existing social infrastructue.



Mark Wadsworth said...


James Higham said...

“What's clear from such an idea is that O'Brien sees forced sale as a means to get 'brownfield' sites developed. What he doesn't tell us is why "derelict land on the site of an old factory" isn't being developed for housing, there's merely a hint that the developer is "sitting" on the land until the council lets it get away without "paying for infrastructure"”

The anomalies are stark.