It has been widely suggested that a government-engineered housebuilding boom may end the recession and bring electoral success to the Tories or LibDems in 2015 (depending on who gets the credit for it). Experts have been scrambling to answer the question of why there is such a shortage of housing, what the obstacles to housebuilding really are.
The Coalition government has so far focused on schemes to help first time buyers and provide housebuilders with finance. These approaches tend to assume that the major obstacle to expanded housebuilding is lack of loan finance due to a banking system still in crisis. In addition Tory policy has been to weight the planning system more in favour of large developers and remove the regional planning layer.
Labour party policy would have government embarking on a major subsidised social housing building programme, plus more stringent conditions on private housebuilders to require them to include subsidised social housing.
Liberal Democrats have been emphasizing the local planning obstacles in different ways. Centre Forum proposed a complex auction-type system for addressing objections to housing developments from local communities. The implication of this proposal is that public objections to housebuilding developments are believed to be the main obstacle to an expansion of housebuilding.
These analyses may be right – but a ‘dynamic’ systemic assessment may be more conducive to problem-solving.
First the supply side – the UK planning permission system is cumbersome, costly, excessively lengthy and time-consuming, as well as being ineffective at reflecting the public interest. In addition the ‘planning gain’ Section 106 demands are arbitrary and hard to predict. The net result is that only very large developers with the right contacts, financing, and admin resources can get through the system and deal with all the uncertainties, and the long time lags.
In addition, since every large developer may expect perhaps only one in five large-scale projects to succeed, they build low-budget schemes with poor amenities but very high profit margins.
The answer perhaps is not just to cave into large scale developers’ lobbying, as the Tories have done. It is better to streamline the whole system, with ‘negotiated public interest’ in mind, and permit better quality smaller developments …. and stop pretending that attaching social housing conditionality to developments has no cost !
The public objections to housing developments tend to relate to over-large, low quality developments with poor amenities, and inadequate responses in the additional provision of local schools, health facilities and transport. In any case they are usually faced with all-or-nothing choices. The public is not nearly as obsessively ‘NIMBY’ as they are painted.
Another problem is that building societies and banks now require large deposits in order to grant mortgages, suppressing demand. This largely a regulatory matter in the hands of government. Insurance against losses in the event of repossession (paid by the mortgagee, with an excess) would do a better job of safeguarding the banks’ assets, if prudential regulations would allow it.
A further problem hindering housebuilding is the set of housing demand assumptions which underpin the planning permission process. Although the regional planning guidance system is now delegated to each planning authority, and county/unitary authority, it is still assumed that the private sector will build dwellings where there is no demand, and government surveys can accurately second-guess demand.
The key problem is that such surveys are politicised and usually rigged in favour of the interests of those assigned to conduct the surveys – housing association board members or dominant developers. In particular, demand for private rented accommodation (the main form of tenure across Europe) is deliberately suppressed. ‘Rachman’ type landlords become a self-fulfilling prophecy.
Before any big decisions are taken, I would implore policymakers to look first at the dynamics of the housebuilding system as a whole, rather than fix the facts around traditional ideologies. After all, getting it right WILL have very major electoral effects !
* Paul Reynolds is an independent foreign policy & international economics adviser, who has had senior political roles in Afghanistan, Iraq, and Pakistan, among other countries across the globe.