Our current government relishes declaring some aspect of the UK’s performance is “world beating”. However, when it comes to housing policy, we are mostly superlative in all the wrong ways.
Between 1970 and 2019, the UK saw the largest increase in the real price of housing of any OECD country. London is perhaps the second most expensive city in the world. “A Review of European Planning Systems” notes that “The UK stands out as a country with very high real rates of growth of house prices and low rates of housebuilding” and infers a link with our usually unpredictable and restrictive planning system.
Not everyone sees it this way. James Jamieson, the chair of the Local Government Association recently told the BBC it was “a myth” that the planning system inhibited homebuilding. He noted that 90% of planning applications are approved and that in the last decade planning permission has been given for over a million homes which never got built.
However, there are good reasons to be sceptical of Cllr Jamieson’s scepticism. Focusing on applications approved or rejected ignores the applications that never get made. Why bother applying to build homes on land that the planning system has already allocated for a non-residential purpose or included in a greenbelt?
Plus, homes being granted planning permission then not being built is not a vindication of our planning system but an illustration of its faults. As Anthony Breach of the Centre for Cities observes: precisely because obtaining planning permission is so costly, difficult and unpredictable, developers have an incentive “to apply for more planning permissions than they can actually use.” This gives them “a safety buffer which they can dip into if one of their applications for planning permission goes pear-shaped” and thereby reduce the risk of their equipment and workforce sitting idle.
This supposition is supported by the finding of a 2014 research paper entitled “the impact of supply constraints on house prices in England” that areas with more restrictive planning policies saw house prices increase faster and new homes get built slower. This result should reassure anyone worried that extra housebuilding will not affect house prices: it can and it does.
The challenge is making that happen. The Government will announce its own proposals this week. However, even if you are sceptical of those, the good news is that precisely because as a country we have so botched planning, there are numerous international models we could adopt that would represent a significant improvement. For example, the Japanese system of ‘flexible zoning’ has delivered enough new housing to keeps rents in Tokyo stable even as the city’s population has risen by 4 million. It also comes closer to a liberal conception of good government. Instead of politicians making often rather arbitrary decisions about individual cases, they are enabled to embody their judgements about a neighbourhood’s needs in principles that can then be consistently and predictably applied across different cases. Liberal Democrats should advocate a similar approach in the UK.
* The author is a Lib Dem member living (and renting) in London. He works in a politically restricted role.
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12 Comments
In Bath they have built so many student homes it’s incredible.
I believe in the need to listen on the subject of caring for our world. As traffic flow increases and flights start again.
Building on floor plains, and lack of housing to suit those without the ability to buy carries on.
We live on a small island, that’s a thought to remember.
The planet struggles with our misuse.
Good article, coming unusually close to voicing the unvoiceable truth at the heart of this: house prices are too high, and it would be a good thing for them to fall. This is one thing that I very much appreciated Vince’s courage in talking about when he was leader.
We are not in any immediate danger of exhausting our “small island”, 6% of it being the sum total of development so far (9% in England). That said, increasing the density of our existing settlements (with integrated mass transit and services to match) rather than throwing up ever more suburban sprawl would be my preference, but we can’t pretend that some development of undeveloped land is unnecessary.
Many people have been encouraged for decades to treat home ownership as a means of making money. How often have economic experts cited rising house prices as a sign of a booming economy?
From my experience of serving for many years on District Council Planning Committees I know how developers operate. Many are sitting on parcels of land with outline planning permission for a specific number of houses. The first thing they used to do when they came back for the final go ahead was usually to add extra houses. What they didn’t do was to give any real thought to the impact that this enhanced development might have had on the local infrastructure. Usually, this never seemed to be a vital factor to giving planning permission. That’s why it’s so important that the local councillor does their job of representing local concerns and also that pro active councils have an enforceable Local Plan.
When all areas have a watertight Local Plan in place, developers cannot slip under the radar. You see, the main problem is supply and demand. Of course we need more houses; but not at the price of effective and enforceable planning regulations. The last thing we want is a free for all, with shoddily built estates without proper facilities, that run the risk of becoming the ghettos of the future. Above all we have got to ween many people off the idea that owning a house is a licence to print money.
We too often look at housing numbers, instead of housing provision. In rural Monmouthshire, like many other places, the houses being built don’t meet local demand. They are expensive, with 2 or 3 car parking places for each house; this only caters to people wanting to commute to England or Cardiff. Local people can’t afford them. Welsh families are strong, but this is forcing children to move away from their parents, which then puts a greater burden of social care on the local council. Secondly, it is ludicrous that when planning permission is given, the profit goes to the landowner who has done nothing to deserve it. This huge amount of money needed to buy the land means the developer needs to build expensive houses to make a profit. All increases in land value due to a grant of planning permission should go to the local council. Allow the landowner, say, 10% of the increase in value, but the council gets the rest: either by the land being sold at market value to the developer (90% of this cost to go to the council allowing them money for other services) or, better, the council to use it to build its own houses, using the beautiful modular technology now available from UK factories, providing well-designed and insulated houses at low prices for local residents.
Building, and building the wrong housing is not what it should be. There seems to be little control.
After Covid things are not stable, firms are shedding employees, I do fear a downturn in the financial sector.
Question for John Marriott:
>From my experience of serving for many years on District Council Planning Committees I know how developers operate. Many are sitting on parcels of land with outline planning permission for a specific number of houses.
Could you explain this, Alex.
It’s not possible to sit on a piece of land with Outline PP for very long, as Outline only lasts 2 or 3 years, then you have to start again and invest another x tens or hundreds of thousands of pounds to restart the game of planning poker.
And there are other processes going on that make that 2-3 years time period very short in relation to doing a development – eg get your PP in April and you won’t be able to touch trees or hedges until Sept or Oct, and then you are into the mud plugging season which makes it all more difficult and expensive for groundworks. And often trees or hedges will be the subject of Planning Conditions that have to be fulfilled before you can actually start.
Oops.
Meant John not Alex.
@Matt Wardman
The way it used to work (and I emphasise ‘used to’ as I stood down from my local District Council in 2011) was this:
A developer would ‘acquire’ a parcel of land and then present outline plans to the Council for approval. If this were a field there would be the usual objections from people living nearby, some valid, like the impact that 50 plus houses might have on the already overstretched infrastructure, some not, like it might devalue their property. As I used to tell them, nobody is guaranteed a view. I have always operated on the principle that the public, or at least some of the public, is not always right.
From what I can recall, a developer could indeed sit on the land and apply later for an extension. What often used to happen was that they waited until the price was right and then make their final bid for full planning permission, often with a significant change in the type of housing offered and, indeed the number of properties, the maximum of which used to be around 29 per hectare. That ‘wait’ could last several decades in rare cases. Green spaces, including gardens, were inevitably at the minimum. The aim was usually to crowd as many properties as possible on to the site. One development in my old patch started with 50 homes and ended up with over 80, all accessing into a road that had not changed, in terms of its strategic importance, since the days of the horse and cart.
Yes, of course we need more houses, both to rent, to buy and with shared equity with no ‘stair-casing’ . Supply and demand over many decades has meant that the average age of a first time buyer in a London is now over forty. What we don’t want is a building free for all which is now the government’s new mantra in wanting to build over 300,000 houses per year, some of which could be a recipe for slums of the future.
The Tories have form when it comes to property and the article would be better for making that point. Their hostility is driven by laws or regulations that hinder insiders’ profits and has very little to do with equitable governance or fairness. For instance:
https://www.mirror.co.uk/news/uk-news/right-to-buy-housing-shame-third-ex-council-1743338
Also £100s of billions is potentially at stake with changes to national planning law. That absolutely guarantees that the
marketing ofpropaganda for any proposals will be the best that money can buy.Mortgage availability and relaxing earnings multiples almost certainly drive house prices more than planning. So, the article notes between 1970 and 2019 “the UK saw the largest increase in the real price of housing of any OECD country” but the fastest sustained rise was from 1996 to 2007 – i.e. that is the years when bank landing was loosened until the financial crisis that ensued. A similar pattern is seen elsewhere – e.g. in Australia which has no shortage of land.
Similarly, the good result outcome quoted for Tokyo covers a ‘property bust’ period after a world record breaking increase in prices driven by overly loose lending.
When it comes to the rate of large-scale new house building in the UK most think the rate-limiting steps are skilled labour availability (because we don’t value it or invest in it nearly enough) and ‘land assembly’ – that is buying (or optioning) land from multiple owners to make a viable parcel with space for parks, schools, roads, utilities etc. This typically take around 7 or 8 years but can take much longer – unless of course all the land starts in common ownership.
Which is, no doubt, why the linked review of European systems notes that in some countries local authorities take the lead in land assembly. The Tories would never countenance that; it would both empower local government and impinge on private profits – the horror!!!
What would help is Land Value Tax which is supported by most Lib Dems.
Also, it must be said, the high level of migration (legal and illegal) is putting strong upward pressure on price and availability; it’s hard to see how that is sustainable.
There is a fundamental illogicality in this article by my namesake. You cannot explain away land banking as simply developers seeking multiple planning applications because the process is unreliable and expensive. Our taxation system makes it extremely profitable to seek permissions and profit from the gain in land value without laying a brick, and that is exactly what major housebuilders and developers do. If it was the cost of the planning system that was a deterrent, the developer would not submit multiple planning applications but be far more selective.
Development plans have thousands of acres of land in them where the principle of development is already established, whether planning consent has been granted or not.
The government’s reform of planning deals with only one part of the problem, and does that very badly, while completely ignoring the much larger problem. Once the local plan has been set, a large profit is made by the landowner. Once the planning application has been granted, more profit is made. Actually building the houses is only the third, and if land values are high, the smallest part of the profit.
We won’t solve the land banking problem until we reform the tax system to give an incentive to get on with development. That’s why we need land value taxation.
The government’s planning proposals are a developer’s charter, taking democracy and public accountability out of the planning process and leading to poor quality unsustainable development.
@Richard a Church
Your final paragraph says it all. I could NOT have put it better.
Part of the issue is that housing is seen as much as a sound investment as a home for a certain part of your life. It is not easy to sort it out given where we are. More renting with easier moving, fair rents and a larger public housing sector will all help. We certainly need more smaller homes, well insulated and closer to places of work or transport hubs.