Opinion: Liberating the land – prosperity through Rigorous Liberalism

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.

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18 Comments

  • Certainly agree with the premise: I’ve seen people attempt to flat-out deny that availability of land on which it is legal to develop is an influence on the price of housing. If we start with the assumption (I do) that the market is the best force to provide housing, we have to remove plenty of restrictions on building before we can accurately assess whether social housing expansions etc. are required.

  • Oops, all the inline links in the post disappeared. When I get home maybe I’ll try and post a comment with them in.

  • Paul Walter Paul Walter 3rd Jan '12 - 5:33pm

    Links now inserted – my mistake – apologies

  • Thanks Paul.

  • Tim Nichols 3rd Jan '12 - 5:45pm

    “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 government has claimed that subsidising housing benefit pushes up market prices, but has failed to come forward with evidence for this. Other analysts have suggested that the market share for private tenancy HB recipients is too small to affect market rates. Have you any evidence you can point to for you agreement with the government’s claim on this point?

    I’m sure there is some value in what you are suggesting, but I fail to get my head around it when I try to think through what it might mean in practice. Could you help me understand it better though by explaining how it would support regeneration of those areas of the UK where there is a great deal of vacant housing stock, but insufficient industry to provide work for anyone who might live there? You seem to be suggesting less interference and more market forces, but how do you make sure that those market forces are incentivising actions that meet human needs, rather than simply commercial interests?

  • Tom Papworth 3rd Jan '12 - 6:42pm

    Excellent article, Jock. I agree with just about all of it.

    I would question the fact that “The system as it currently works benefits only landowners”, however. It also benefits the planning bureaucracy, of course, which is a massive and powerful lobbying block. You won’t find many councillors or local authority officers campaigning to remove the power of planning authorities.

    I would also question the use of the word “sprawl”. The phrase “urban sprawl” is deliberately loaded; “urban spread” would be far more semantically neutral. After all, any two houses together are an example of “sprawl” but it is not intrinsically a bad thing. In fact, efforts to resist “urban sprawl” can be environmentally damanging: for example, in preventing the Green Belt around London from being developed we have simply built over bits of the home counties instead of the outer London boroughs, which has had three effects: low-value land in the Green Belt has been “saved” at the expense of more valuable land in the counties; more land has had to be developmed to create the infrastructure for longer commutes; longer commutes also result in more pollution. Hardly something that the Campaign for Rural England and the (so-called) “Green” Party should be supporting.

    One crucial factor that you have not covered is the fact that the planning system in the UK has removed the requirement to compensate those who suffer third party effects (aka. externalities) from developers. This means that third parties are rarely, if ever, compensated and as such they are always encouraged to resist development. To put it another way, NIMBYism is entirely rational within the context of the Town and Country Planning Acts.

  • Daniel Henry 3rd Jan '12 - 8:32pm

    I didn’t agree with this argument:

    “Quite apart from the failure to grasp the economics (nobody profits from building where nobody wants to live)”

    1) Sometimes the green belt is threatened by expansion of existing towns.
    2) Developers don’t always take a such a rational approach. Sometimes they figure that people will buy a house on cheaper land, even if it means more travel.

    I agree that measures designed to drive down the price of land should be looked into but taking the “deregulate and let the market magically sort things out” is a bit wishful. Regulation and some protection is required. The question is over the most effective way to do it.

  • Jock Coates:

    “Artificially restricting land supply drives up land prices and drives down housing quality.”

    Really? Do you have any evidence to support this assertion? Do jurisdictions with strict planning controls have a poorer quality built environment than those with few or none? Does Britain have poorer quality housing than Brazil? Quality would rise if ministerial guidance allowed LPAs to refuse permission purely on design grounds, or if Section 106 money could be used to improve the development rather than be squandered on electoral bribes.

    Tom Papworth:

    “It also benefits the planning bureaucracy, ”

    Most town planners I know would laugh themselves silly at that comment. How many town planners are there? Few LPAs employ more than a dozen. And few earn more than £40k per annum, some a good deal less. Certainly very much less than is available in the private sector. And planners in the private sector don’t get demeaned as “bureaucrats” by fee market libertarians. Without town planners we would be living in the free market dream of Sao Paolo rather than London.

    “The phrase “urban sprawl” is deliberately loaded; “urban spread” would be far more semantically neutral.”

    We all have our own aesthetic tastes. Some would regard suburban Houston as beauty unsurpassed. The majority, however, does not, and democracy is about accepting majority decisions as the late Hugh Scanlon once famously said. Take a look at the Sussex Coast. From Selsey along to Newhaven one has largely featureless sprawl, punctuated only by Brighton. Now, I pause to mention Brighton, because without planning controls, there would have been nothing to stop Nicholas Van Hoogstraten from turning it into Benidorm. Then, suddenly, white cliffs, open Downs and stately Eastbourne. Yes, the much derided National Trust stopped the developers in their tracks and kept the Seven Sisters open for all of us to enjoy. And town planning came along a little later to protect the land beyond. Doubtless, free market libertarians would prefer to see those hills covered in gerry-built Noddy houses, or highrise flats, as they would be in Rio de Janeiro.

    “for example, in preventing the Green Belt around London from being developed we have simply built over bits of the home counties instead of the outer London boroughs, which has had three effects:”

    Which bits? Southwater? West Chiltington? Fleet? Bracknell? Surely it is better to spread development around a bit and create recognisable communities with easy access to open countryside, than extend London to Westerham and Limpsfield?

    “low-value land in the Green Belt has been “saved” at the expense of more valuable land in the counties;”

    Where? While I agree that some Green Belt land should not be in the Green Belt (around Heathrow Airport, for instance), much recent development in the Homes Counties has been on land with low aesthetic or amenity value in North Kent and South Essex, and the old military land of the Windsor Forest region. The Weald and the Downs have been spared, pretty largely, and let’s be thankful for that.

    “more land has had to be developmed to create the infrastructure for longer commutes;”

    Most of the infrastructure facilitates much long journeys. The M25, M3, M4, M2, M20, etc, were not built primarily with London commuters in mind but to accommodate long-distance commercial traffic essential to our economy.

    We need stricter, not weaker planning controls. All power to the CPRE and National Trust.

  • I agree with Daniel, the result of the policy you propose is likely to be urban sprawl, more out-of-town development and further damage to our town centres.

    The alternative policies you propose to prevent this are unconvincing. You state that: “an amenity group, local land trust, or similar could compete with developers to buy up sites they’d rather not see developed.” Surely you are not seriously arguing that a local amenity group could compete with the likes of Tesco in buying up sites?

    As has been pointed up elsewhere, housebuilders already possess large land banks so it is not lack of available land that is preventing them from building, it is the state of the economy and lack of demand.

  • John, you are right.

    The removal of planning controls would simply result in urban sprawl of the kind one sees in the US Mid-West: hastily constructed pre-fabricated houses in plots far too big for the owner’s needs – and given the open plan character of most of this development, failing to afford the privacy that we expect of gardens here in the UK.

    Compare Texas and Vermont. Texas has few planning controls, with the sprawling suburban splurges of Houston and Dallas and dead empty spaces in between. Vermont, with very strict planning controls, lacks a single town with more than 40,000 inhabitants. What it does have is numerous small, vibrant communities.

    Now take a look at a satellite view of New York (Google will bring one up). You will see that New York State and Connecticut, which have restrained development, have more economical use of land and more green open space close to urban centres. New Jersey, on the other hand, has simply allowed development to march remorselessly towards the Pennsylvania border without regard to considerations of parsimonious land use.

    And consider Detroit. The suburbs move ever outwards while the city itself decays. Why not build new houses on the vast tracts of burned out lots close to workplaces rather than swallow up yet more green fields? Once again, the unrestricted free market fails to deliver where rational planning has been shown to succeed.

    Yes, housebuilders do indeed possess huge land banks. The reason why these holdings are not being developed has nothing to do with town hall “bureaucrats”. The owners are hoarding the land so as to create an artificial shortage and thereby increase the value. Greed doesn’t always work to the public good, as the free market libertarians like to have it. There is one such site near me. It has been empty now for near on 20 years. It was laid out with roads and footpaths and a ghost bus service some five years ago, but only a fraction of it has ever been developed. It serves as a breeding ground for rabbits when its intended use (at least, according to the planning permission) is a science park and housing.

    When Jock talks about amenity groups buying up land to protect it from development, he is probably referring to bodies such as the National Trust, Woodland Trust and RSPB. The problem is that all these groups combined would never be able to buy up sufficient land to do what planning controls currently do. The National Trust was able to acquire the Seven Sisters and part of the Cuckmere Valley, thus stopping Seaford in its tracks. But it could never buy up the whole of the South Downs, let alone the Weald. And I would prefer elected politicians to tell us what land should be kept open rather than unelected amenity groups.

  • Re: “Do jurisdictions with strict planning controls have a poorer quality built environment than those with few or none?” There is evidence to this effect in Hartwich and Evans, Bigger, better, faster, more, Policy Exchange.

  • Jock,

    “First, they do not have very large land banks housing wise”

    This simply is not true. And you would have seen the example I gave in my post above at 5.33pm yesterday, if the LDV censor had got round to passing it, which he/she hasn’t yet.

    Your above statement is actually impossible to make, and that is because there is no register of undeveloped land having planning permission. I can reel off numerous such sites, some just a few square metres, others hundreds of acres, such as the one I mention in my yet-to-appear post of 5.33pm yesterday. You must surely be aware that a substantial proportion of planning applicants never implement the permissions they are granted. Rather, they hold on to the land to increase its value, and then sell it, with the permission, at a huge profit, and the next owner does the same. OK, the Treasury scoops up dollops of CGT, but the land is wasted, and the price of housing is artificially inflated.

    On the subject of toll roads, I don’t think any serious politician is going to run with that one. Why? Well, let’s face it. The only way it could be enforced without long queues would be satellite surveillance. Which is the next step on the control agenda which the last Labour government funked and basically went to sleep with the dying of the Cheney White House – though the Romney one will doubtless revive it.

    Tim,

    As an academic, you can surely do better than simply cite an article published by a Tory think tank. Can you not actually tell us what the arguments are? How do the authors measure one planning control against another, and what do they mean by “quality”?

    Let me give you another concrete example. The coast of the Basque Country. On the French side there is a high incidence of low density housing, much of it high standard. On the Spanish side, there are hardly any dwellings with private gardens at all, just serried ranks of gerrybuilt flats crammed into every available nook and cranny. Same nation, same culture, same language, but two very different planning regimes.

    I do despair at the fact that articles like Jock’s espousing the most extreme free market positions evince barely a word of criticism from the numerous planning experts we have in this party who could easily rip it to bits. Giving the impression, of course, that radical free market fundamentalism is party policy. It just shows how far we have come as a party on our sleepwalk rightwards.

  • Jock,

    ‘LA has strict zoning and planning but huge sprawl.’

    Most of that sprawl is outside LA County and has been since the 1950s.

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