Where the heart is
The government needs to face down its enemies on planning reform
One of the most beautiful and still relevant phrases in the Book of Common Prayer is the aspiration to “be godly and quietly governed.” Our planning and development system is the obverse: noisy and controversial, regressive and reactionary, it creates, slowly and at huge expense, bad places which are objectively less popular than those we created in the past. Just look at the leaflets of the winning Liberal Democrat candidate in the recent Chesham and Amersham by-election which warned ominously — and effectively — about handing power to developers. Nor does it create enough of them with catastrophic consequences for standards of living and generational inequality.
If you don’t believe me, look at the numbers. Most historic neighbourhoods and homes are consistently worth more than new neighbourhoods and homes even when you adjust for other factors. A study of every property sale in six British cities found a premium associated with older neighbourhoods up to seven times greater than the premium for new build homes. Two thirds of British adults say they would never consider buying a newly-built home. Only 21 per cent say a new home is their preferred option. Given the lamentable build quality, you can hardly blame them. A recent survey by UCL found that at least three quarters of new developments were mediocre or poor.
It is hard to escape the conclusion that we just don’t have enough homes in the right places
But it is a problem of quantity as well as quality. The ratio of average UK house prices to average incomes has doubled since 1998. The UK had the highest growth in real house prices of any OECD country over the last 45 years — nearly four times the average. This means that Britain’s housing challenges are not just retarding the age of home ownership. They are fundamentally changing generational fairness.
A smaller proportion of people born between 1981 and 2000 are homeowners, at this life stage, than for any previous generation since 1926. And their rent payments have increased from 10 per cent of net income 30 years ago to around 30 per cent now. This has enhanced generational inequality on a seismic scale with immense political ramifications. As the post-war politician, Iain Macleod, put it: “You cannot ask men to stand on their own two feet if you give them no ground to stand on.” Is it surprising that the politics of so many of the educated urban young are becoming so flippantly revolutionary? What do they have to lose?
What should be done? In times of trouble, many turn to what they already believe. However, many facets of the British housing market routinely “blamed” for high housing costs are not actually that different from other countries.
Some blame cheap credit. But credit rates are not lower (0.1 per cent bank base for sterling versus 0 per cent for the Euro area).
Others blame the lack of affordable housing. But the overall proportion of affordable housing in the UK (18.6 per cent) is not lower than the EU average (10.8 per cent). Nor are there more empty homes (there are far fewer).
Looking at data comparatively, it is hard to escape the conclusion that we just don’t have enough homes in the right places. Nationally our ratio of homes to households (0.99) is one of the tightest in Europe (average: 1.12). Nor does this reflect suppressed household formation due to high prices. We probably need at least a million more homes.
Many studies demonstrate that “greater” regulation of housing markets tends to be aligned with constrained supply and higher prices. However, it is difficult to argue this simplistically in Britain. The annual supply of planning permissions is now outstripping the government’s annual target (of 300,000) and the gap between homes permitted and homes completed is widening (from less than 100,000 seven years ago to nearer 200,000 in 2016-17). What is going on?
In Germany the freedom to build is a part of the constitutionally-guaranteed definition of property
There is a smoking gun. Since 1947, the right to develop in the UK has been nationalised. But the implementation of that nationalised planning right is profoundly unpredictable. A new building in England needs planning permission; a case-by-case judgement by a planning officer. This judgement is based on the local plan which is a policy document not a regulatory one. It gives principles and guidance. It doesn’t set rules. Knowing what you can build, “winning” permission (a telling phrase) takes time, judgement, experience — and money.
This is fundamentally different to most other countries where the right to develop is not nationalised but regulated. In countries as diverse as America, France and Germany, as long as landowners follow the local regulations, the difficulty, complexity and cost of achieving development is very modest compared to the UK.
In Germany, for example, the freedom to build is a part of the constitutionally-guaranteed definition of property. It is not granted to the property owner by the law. It is innate. Bottom-up not top down. Since 1947, the opposite has been true in Britain. The right to develop property is granted by the state. It does not come with the land. Even exceptions (so-called “permitted development”) are just that: exceptions carved out by legislation from the universal need for individually negotiated case-by-case permission.
As a way of regulating an entire section of the economy our approach is inadequate. All standard frameworks of good regulation suggest that regulation should be predictable, certain, not subject to producer capture or to “who you know.” When this is not the case then markets become “hard to enter” and are unduly influenced by an oligopoly of large firms and producer not consumer interests.
This is what has happened in England. Greater uncertainty and a slow process with major expense up-front before the right to build is certain has increased planning risk, enormously pushed up land prices with permission to build and acted as a major barrier to entry for small developers, minor landowners, self and custom builders and innovators generally.
Far more people commission their own homes directly in most other countries. You can literally order them from a catalogue or engage a small local builder. That’s just not feasible in this country. Only the big boys can negotiate all the cost and risk. Our self-build market is miniscule. And small British firms build fewer new buildings proportionally than any other European country — and still falling. Thirty years ago, small builders built 40 per cent of new homes. Today it is 12 per cent.
This lack of choice leads to too many poor homes and not enough of them. Developers sell at the speed “the current market” will bear. Unlike the rest of the world, there is no meaningful competition from small builders or self-commissioned homes to meet demand and constrain prices. Hence those slow build out rates and the vicious circle of high costs, constrained competition, constrained supply, high prices and bad places.
England should introduce more predictable planning for mass market new homes and for simpler situations. We should stop treating all development as a bespoke process and “move the democracy forward” where possible from the development control process to the setting of the local plan.
The bespoke planning permission process should be reserved for the difficult, the different and the controversial. Then, as in the United States or much of Europe, the (important and necessary) democratic debate can take place at the plan-making stage not the development-specific stage. Then we can regulate development not nationalise it.
Far more people commission their own homes directly in most other countries
This is the approach we took historically (see the Housing and Building Acts or the Public Health Acts). And it is the approach that the late Sir Roger Scruton and I set out in the recommendations of the Building Better Building Beautiful Commission. Some of our recommendations have already been taken up. Others were mentioned in last year’s Planning White Paper which, I hope, will influence the forthcoming Planning Bill.
But, of course, planning reform has many enemies. And they are circling. How can the government win through?
There are two main groups to worry about. The first are NIMBYS who need love. Over the last few generations a toxic cocktail of technology (we can build huge ugly sheds very cheaply), confusion about the role of the car in the city (for three generations we thought town centres were places for cars), increasing labour costs (making detail and ornament expensive) and, above all, modernist fashion (eradicating the past and the human scale rather than working with it) have all combined to ruin old places and build new ones that most people reject if they can afford to. That’s why so many people in places such as Chesham and Amersham are so fearful of “developers” and new homes.
Mapping selection effects (where people pay more to live) does not make pretty reading for fans of suburban cul-de-sacs or modernist anti-street planning. Hardly surprisingly, the instinctive, innate response to development from many has become that it is bad and must be avoided at all costs. Sadly, this has been a rational fear. Too many architects are dismissive of public preference (“the public need educating to understand good design” is one of the most noxious concepts) and the volume housebuilders simply don’t employ them in consequence. Everyone loses.
To overcome the public’s fear of development we need to address its root cause. We need to create better, greener, more beautiful places with certainty about the accompanying benefits and quantum of affordable housing not the current bun fight. Even though 60 per cent of the public support more homes, only 2 per cent of the public trust developers and only 7 per cent trust planning.
Why do we want to be reliant on such a small number of firms to build our new homes?
I don’t blame them. To overcome this collapse in confidence, we need to learn how to set simple, visual local plans and design guides which actually reflect the lives people lead and the sorts of places in which they wish to live (full disclosure, I have been asked by the government to help achieve this).
I have slightly less sympathy with the second group of critics: consultants and lawyers make a good living out of the current chaos. Some are finding multiple and complex reasons why England’s planning should remain inefficient and regressive. Some of the largest housing firms agree. High barriers to entry are always welcome to established players.
Those who claim to speak for the everyman but who are in fact defending a system which is regressive in the extreme need to answer one key question. We are systemically building fewer homes and less good places than we should. Given this, what is so different about Britain that, uniquely in the word, we should regulate all of what we build through sequestrated judgements by planning officials not clear rules that anyone can follow?
Why do we want to be reliant on such a small number of firms to build our new homes? We are being noisily governed. Exceptionalism is justifiable when it works. Ours isn’t working.
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