Nicholas Boys Smith is the Director of Create Streets and a Fellow in Urban Design at the University of Buckingham.
Worldwide there is a crisis of housing affordability in many successful cities. It is caused by low interest rates, by high demand to live in some city centres (which are better managed and more attractive and liveable than for generations), and by the regulatory and other constraints which make it hard to build new homes in or near city centres. However, the UK, and specifically England’s variant, has mutated into something far worse. There is not just a crisis of affordability in London, but in much of the country from Abingdon to Yarmouth. Why?
The public arena is waist-deep in reports and angry tweets on ‘the housing crisis’. Some are excellent. Sir Oliver Letwin’s recent report on build out rates is incredibly important. Many, however, are not. It would not be entirely unfair to say that too many on the Left descend into ritualistic attacks on developers or on the provision of private homes (still the favoured tenure of consistently strong majorities of our fellow citizens). However, many on the centre-right also end up aiming slightly naïve attacks at ‘planning’ entirely missing the fact that nearly all countries regulate land use, but somehow do so without the perverse consequences we face.
Since the 1980s, Britain has consistently had some of the slowest increases in housing stock. In the 1980s, the UK built houses at only 71 per cent of the rate of the simple average across Europe, according to estimates made in a study for the IMF. In the 1990s, this dipped further to 42 per cent. From 2000-2004, that fell to 39 per cent. This had led to a very tight supply of new homes with, consequently, some of the lowest ratios of homes to people or households.
Why is this? Where is the smoking gun?
To answer that, we need to look at the actual detailed dynamics of how our planning system works and asks why this is odd comparatively and historically. We have tried to do this in our new report, co-published with the Legatum Foundation, More Good Homes.
We believe that the national discussion about planning and housing need has ‘gone wrong.’ It is underpinned by almost no understanding of the historically and comparatively peculiar way that the UK manages government intervention in, and regulation of, the land market. In addition, it has led to too many formulaic and repetitive policy proposals that are tangential at best, and un-implementable or positively unhelpful at worst – dealing with symptoms not maladies.
In times of trouble, we turn to what we already believe. Those who like state intervention call for more affordable housing apparently unaware that the UK already has more affordable housing than most other countries (18.6 per cent versus an EU average of 10.8 per cent). Those who dislike state intervention call for ‘less planning’ apparently unaware that the UK already has ‘less planning’ than nearly any other western democracy.
The key fact is that in historic and comparative terms, the UK has a very strange planning governance and process. And this really matters. The right to develop in the UK has been nationalised, with uncertainty of what will be permissible. In much of the world, the right to develop is merely regulated, very often with greater clarity about what is permissible. We rely more on development control and less on rules. Put differently, we are (trying to) run a bespoke system (discretionary decision-making) for a mass product (housing). We allocate for individual sites on a case-by-case basis rather than zoning more widely for what is, and is not, permissible. We have less clarity, more discussion and fewer rights to develop land or build new homes.
All this matters because the slow process and reduced clarity increases planning risk. This poses a major barrier to entry to smaller developers, self-builders, build-to-rent providers, and third sector developers. It is not an accident that the UK has a consistently and increasingly more concentrated development sector. In Britain about 10 per of homes are built by self or custom build (versus a European average of 50 per cent); and 34 per cent of the construction market is made up of smaller firms. (In Germany, it is 50 per cent, in Denmark 73 per cent).
In turn, the lack of competition drives down housing supply and drives up prices. Ineffective land use regulation retards British productivity (by some estimates pushing up costs by up to 40 per cent in some industries). It reduces GDP per head (potentially up to 25 per cent) eroding disposable income and living standards. The ratio of average house prices to average incomes has doubled since 1998. As is well known, this is having catastrophic consequences for standards of living and wealth inequality, above all generationally. A smaller proportion of people born between 1981 and 2000 are homeowners, at this stage in their lives, than for any previous generation since 1926. And, what they are paying in rent has increased from around 10 per of their income 30 years ago (15 per cent in London) to around 30 per cent (and 40 per cent in London).
So what is the answer? We need to move to a system where more homes are built through a much greater variety of channels and players. This would lead to cheaper housing and greater prosperity. The biggest drain on disposable income has become more expensive housing, particularly higher rents.
However, if we do this by just ‘ripping up planning’ and ‘building everywhere’, we will lose political support for more homes, above all from homeowners less directly affected by this crisis. Building beautifully with consent will be faster, less controversial, and more effective.
To achieve this, we need to improve the way we govern planning. We need more certain processes, accountability, and power in order to erect fewer anti-competitive barriers to entry and permit the construction of homes that people find beautiful in popular urban patterns with popular support. The good news is that improved data is making it much easier to understand what people like, want and will support. This will encourage societal prosperity and more equal opportunity. Such a system could actually value planning (and planners) more. It would free them up to focus on what really matters and add much greater value to society (as they desire) without being dragged into the miasma of countless development control decisions.
More Good Homes sets out a vision for planning by 2030 that would stop applying a bespoke process to a volume problem.
Among our key suggestions are;
- Better regulation – moving from an unpredictable ‘bespoke’ system to one of more predictability and consistency in most cases;
- Lowering barriers to entry on large sites;
- Not regulating where not necessary; and
- Permitting the gentle and popular intensification of our streets.
At the heart of all of these is the suggestion that, as is the case in most of the developed world, we should move from a planning permission-led system to a building permit-led system in the majority of development situations. To construct via a building-permit approach would require strict adherence to a very clear (but limited) set of rules on betterment payments and design. Ideally, this would be entirely aligned to strict and clear building regulations. If these rules were followed then approval would be a matter of course, with post-construction verification wherever possible. This should speed up the development control process exponentially, help set land prices, free up planners to focus on real planning, and limit planning risk which acts as a critical barrier to entry for smaller developers and non-volume house-builders. Building permits would be particularly appropriate for smaller and more straightforward sites.
The flip side of more predictable regulations is that we should not regulate where it is not necessary. It should not normally be possible for Local Planning Authorities to object to design or other elements not covered within the fast-track building permit routes. For example, although it would probably be considered appropriate to regulate the minimum size of a home built under the building permit approach, we would suggest it would not be necessary to regulate current room sizes as happens at present.
Ultimately, we need to ‘move the democracy upstream’ as is the case in most other countries. Planning reform needs to work for everyone if it is to survive and such an approach would, we hope, be broadly politically acceptable to most on the centre-left and the centre-right, the broadly dirigiste and the essentially free market. It would also fulfil the criteria of good regulation – qualities in which the status quo is, despite the hard work and good intentions of many thousands of public servants, sadly, woefully and shamefully short.