The central tenet of what I call “Rigorous Liberalism” is that a truly liberal state would seek to eradicate economic, social and class barriers to equal opportunity before creating more government programs to subsidise people at a disadvantage in markets distorted by decades or centuries of privilege and rent-seeking.
Nowhere is this need more obvious than in land, planning and housing policy. Artificially restricting land supply drives up land prices and drives down housing quality. If customers can only afford so much and most is sunk into land costs there’s not a lot left for competition to drive up quality. When we subsidise housing, especially in the form of Housing Benefit, we drive up prices for all renters and buyers such that the only ones who ultimately benefit are ones with more than they need – either as rentiers or down-sizers. The direct benefit recipients are often then locked into dependency while the rest of us have to pay above the price floor Housing Benefit creates, worth hundreds of billions in rent and interest, not to mention the tens of billions the benefit itself costs.
Many will know me, at least formerly, as an advocate of Land Value Tax as a means both of reducing an economic bad – land costs – and of incentivizing economic goods like labour and investment in productive capital by replacing taxes on those activities. If we must have tax, I still maintain that LVT is about the least distorting tax we could have. But we never seem terribly keen on putting our century old policy into effect. Even if we did, however, it should be a precondition that we do everything we can to reduce artificially inflated land prices first. This means taking a long hard look at the role of planning.
In fact I suggest that we abandon land use planning as we know it entirely.
The system as it currently works benefits only landowners. And even then, only landowners who are good at lobbying. If we only release new sites every few years we are effectively drip-feeding the market with land that at best maintains currently high land values, at worst inflates them hugely. Because it’s infrequent, we end up with fewer, larger sites operated mainly by larger developers.
The government’s National Planning Policy Framework (NPPF) does not go far enough in liberating the land, but for months now a unholy alliance of protectionist (CPRE), environmentalist (Green Party) and middle class (National Trust) groups have held the high-ground claiming that it will lead to the apocalyptic devastation of the countryside by profit-hungry developers.
Quite apart from the failure to grasp the economics (nobody profits from building where nobody wants to live) these groups are supporting one of the most egregious transfers of wealth from those without even the basics in life to politically connected vested interests: landowners, bankers and simply those with a view from their B&Q decking that they think the world owes them.
There are other ways to prevent sprawl or inappropriate development than impinging on someone’s right to do as they please with their legitimate property. In a low land cost environment an amenity group, local land trust, or similar could compete with developers to buy up sites they’d rather not see developed. The maintainer of roads, whether public or private, could charge market rates for connection to the transport infrastructure. And at the same time, reducing artificially high marginal land costs will put pressure on owners of under-utilized urban land to use it, or see its artificial scarcity value seep away.
Less interference, less privilege, less dependency, and greater equity and opportunity for the currently disadvantaged: what could be more rigorously liberal – or in tune with our party’s constitution?
Jock Coats is a former a Lib Dem city councillor in Oxford where he was involved in planning and housing policy, chair of Oxfordshire Community Land Trust and, belatedly, an undergraduate economist.