Does Boris Johnson have the guts to tackle the rigged housing market? That was the question posed in January in the last review here of a book about housing.
We turn now to a pamphlet published by Policy Exchange which gives grounds for cautious optimism. It consists of essays by a dozen hands indicating various ways in which the planning system is utterly unfit for purpose.
Robert Jenrick, the Housing Secretary, has welcomed this work and said: “It’s time to rethink planning from first principles.” According to Wednesday’s Financial Times,
“Ministers are preparing for a major overhaul of the planning system in England to speed up approvals for new developments as part of the government’s attempts to kick-start the economy hit hard by the coronavirus crisis. Central to the proposals are the introduction of a zonal planning system and the creation of special development zones, in which private developers will play an expanded role.”
Jack Airey, who until recently was Head of Housing at Policy Exchange, is now Special Adviser to the Prime Minister on Housing.
And in January, Airey wrote a piece for ConHome to mark the launch of an earlier Policy Exchange report, Rethinking the Planning System for the 21st Century, in which he observed:
“When renters pass over half their monthly income to their landlord, they should blame a planning system that protects existing property wealth at the expense of people who work hard and get on in life.”
We have for over 70 years rationed the use of land, which has in consequence become absurdly expensive. Attempts to stimulate the economy often have, as one of their chief consequences, the inflation of property prices, so that those who possess houses become, at least on paper, richer than they could ever have expected.
Warwick Lightfoot, Head of Economics at Policy Exchange, sketches in his essay how the state took control of land use:
“The 1947 Town and Country Planning Act was passed in a specific political, policy and cultural context. Just two years after the conclusion of the Second World War, the British economy continued to be subject to wartime controls.
“Food, petrol and clothes were rationed. The location of business and industry was determined by ministerial fiat. Whether a particular building was built or rebuilt turned on ministerial decisions about how brick production should be allocated.
“A vivid example of this is provided by the decision not to rebuild Holland House – a Jacobean mansion in west London, largely destroyed by enemy action in 1940. Its owners wanted to rebuild it, but were prevented from doing so by Herbert Morrison the minister in charge of the economy and supply.
“There was a broad consensus on nationalisation, planning and controls. The passage of the 1947 Town and Country Planning Act was consonant with the zeitgeist of this epoch. It was a socialist piece of legislation.”
Most other wartime controls were abolished during the 1950s. Planning wasn’t, but at first, the two main parties competed with tremendous determination to build the most houses.
Harold Macmillan, charged in 1951 by Winston Churchill with fulfilling the Conservative election pledge to build 300,000 houses a year, attained that target and made his name – a story told some years ago on ConHome, which concluded:
“There are some lessons in this for the modern day. Macmillan showed that the ruthless application of political will, along with businessmen employed as fixers, could achieve a surprising amount. He had no qualms about arranging for the building of vast numbers of council houses: Labour was to some extent beaten with its own weapons. But markets were freed up too: the abolition of wartime rationing was the other clear success of this administration. It seemed natural to this generation of Conservatives when necessary to mobilise the resources of the state with wartime determination. Ministers demanded ‘Action This Day’. Modern government looks by contrast a very tentative exercise.”
Will Johnson and Jenrick prove as formidable as Churchill and Macmillan? Only if they achieve something like the same combination of “Action This Day” with market freedom.
The first essay in this collection is by Bridget Rosewell, an economist who is also a member of the National Infrastructure Commission.
She observes that planners at present “stop things more easily than they permit them”. They also make “utterly imperfect” predictions of housing need, which everyone else involved in the process then has to take seriously:
“The National Infrastructure Commission (NIC), on which I sit, was asked to look at supporting the development of one of the most productive parts of the UK economy, involving Oxford, Cambridge and Milton Keynes – hence CaMKOx. We concluded in a first analysis that the economy would require an additional one million homes over the long term…
“This is …roughly double the number defined in the ‘need’ assessment and hence enshrined in local plans…. Local residents may well resent an influx of new residents, even while they are providing opportunities for their children and indeed their grandchildren. Future generations have rights too, but imposition on current ones is seen as undemocratic. The NIC had to be careful in making its recommendations in order not to be seen as making specific locations a policy focus for fear of subverting the planning process and creating the potential for judicial review. Planning lawyers came along to lecture us on the subject!”
This is no way to get things done. The Infrastructure Commission proposes a proper railway between Oxford and Cambridge, and investment in roads, which in Rosewell’s account is
“all about creating a more effective labour market and housing options for all the people, from hospital porters to post doctoral students who are currently priced out of one of the most expensive housing markets in the country.”
In her view, “we must abolish the Plan as a shibboleth, a straitjacket and an industry.” This is evidently desirable. The present Government will not be able to transform infrastructure if ten or 20 years of planning are required before any actual building can take place.
Nor will it be able to bring the price of houses back within reach of people on modest incomes, who a generation or two ago could expect to become owners, and now face lifetimes of paying rents so exorbitant that saving to buy a place of one’s own is out of the question.
Whole professions have grown up whose purpose is to navigate a way through the planning system – a task which has become so slow, expensive and uncertain that small builders have given up, and housing is dominated by an oligopoly of huge firms which have a vested interest in keeping the price of building land at its present exorbitant level.
Several of the contributors to this pamphlet call for radical reform, without quite saying what that would be. For the presumption that if one owns a piece of land, one ought to be able to build whatever one wishes on it, has been replaced by the presumption that if someone else owns a piece of land, one ought to be able to stop any development on it which one believes one might not like.
All of us will have witnessed minor local planning rows in which hysterical objectors convince themselves that the end of the world is nigh.
Yet on those occasions when the project goes ahead, the world does not come to an end.
And all of us will also know of large, unspeakably shoddy buildings which have somehow won approval under the present system.
When planning permission is granted, the value of a piece of land increases enormously, and local authorities have various ways of taking part of that profit and using it to pay for the infrastructure which new houses will require.
The authors of these essays make proposals for simplifying that process.
Ebenezer Howard, who in 1902 published Garden Cities of Tomorrow, had a more radical suggestion. As Sue Chadwick points out in her essay about him at the end of this collection, he proposed that the land on which a new settlement is to be built should be bought at its agricultural value.
Howard’s proposal was incorporated into the 1947 Act. Landowners hated it, and as Liam Halligan relates in Home Truths, reviewed here in January, persuaded Conservative governments gradually to dismantle this provision, until under the 1961 Land Compensation Act, landowners gained the right to receive full value for all sites, including any prospective “planning gain”.
Since 1961, owners of potential building land have had had a vested interest in the maintenance of a planning system which creates an artificial scarcity.
They can sit tight and get rich by doing nothing. Private greed and public inefficiency are yoked in an unholy alliance.
And from a political point of view, this presents a colossal obstacle to reform. Millions of homeowners have a vested interest in upholding a planning system which artificially inflates the value of their houses, because it makes the land on which those houses sit so valuable.
Only when land prices come back down will houses once more become, in the jargon, “affordable”. But what party wants to go into an election telling homeowners that it intends to provoke a crash in property prices?
Nor would that crash be without wider consequences. Just as the measures taken to prop up the banks after the crash of 2007-08 also had the effect of keeping the property market at artificially high levels, so a property crash would probably carry the banks down with it too.
Such thoughts, which go some way beyond this admirably slim volume of essays, mean one should perhaps keep expectations of what Johnson and Jenrick will be able to achieve within bounds.