Alex Morton is Head of Policy at the Centre for Policy Studies, and is a former Number Ten Policy Unit Member.
You don’t need to live in a town or city to know that Covid has had a shattering impact on their commercial spaces. Offices and shopping centres that once buzzed with activity have been shut down for months on end. Even once we are past the pandemic and pingdemic, it is still not clear how much activity will return.
This represents a profound challenge to the Government’s plan to build back better. Even before the pandemic, many of our high streets had started to look like ghost towns. And the problem is worst in those areas that are most electorally important to the Conservatives: as I point out in a new report for the Centre for Policy Studies think tank, there was a clear correlation between higher rates of retail vacancy and the number of new seats the Tories won in each region in 2019.
If the Government is to revive high streets, a clear and bold approach is necessary – and if that revival is to be in full swing by the next election, it needs to start now.
The Government has already made it significantly easier to convert unused commercial space to residential. This would not only bring new life to commercial spaces, but help tackle the housing crisis. Our new report, Reshaping Spaces, calculates that even before Covid-19 there was space for at least 500,000 homes from recycling surplus retail space into homes and flats.
This is a likely underestimate, since in the wake of the pandemic there will be an opportunity to regenerate entire commercial centres (often at higher density), and since as home working and hybrid working increase, there may be surplus office space that can also be converted (although it is too soon to know if this is true).
Reshaping Spaces makes a series of recommendations to make it easier to regenerate commercial centres. For example, we argue that business rates are no longer fit for purpose and are damaging commercial centres. At the very least, Government should reform the incentives to hold onto vacant commercial space: currently the business rates retention system penalises councils for recycling buildings more than keeping them vacant.
But arguably the most important recommendation is that, as the first step in the new local plans, all councils should put a commercial needs assessment in place by 2022, assessing levels and location of commercial space. Councils should receive additional funding to pay for this, and see a small incentive payment made when this is completed. Where the local council does not do this, Government should step in and complete it, working with local employers and landlords to create such a plan.
Thus by the time of the next election, probably in 2023, every area would have a plan for its commercial centres – the high streets and business districts, the retail parks and out of town office hubs. People could see that there was a plan and action underway following on from it. But, crucially, councils would be able to use this assessment as the foundation of the wider local plan: in essence, the first step would be to reassess the level of brownfield land available, before moving on to the green.
The political advantages of this approach are obvious. There is nothing more frustrating than brownfield sites remaining unused with no plan of action in place, whilst new homes on greenfield are pushed through on appeal. This is partly why the CPS has called for planning permissions to be turned into delivery contracts, so that permissions are actually built out (see here) – something many SME house builders have welcomed.
But there is also a political danger. One of the more seductive myths in the housing debate is that there is enough brownfield land available to satisfy our housing needs.
It is true that there are things that can and should be done to reduce the amount of greenfield development that is needed and to boost home ownership without building more.
As we have pointed out at the Centre for Policy Studies, it is a scandal that, in the decade after the financial crisis, buy-to-let landlords essentially snapped up all of the extra housing stock that was built. Rebalancing the housing stock in favour of owner-occupation should be a crucial priority for Government – hence our proposal for long-term fixed rate mortgages for first-time buyers (see this excellent report), which was taken up in the 2019 Conservative manifesto. The Government could still go further, perhaps by introducing a CGT cut for landlords who sell up.
We also recently published a briefing note that showed how net immigration has a significant impact on the level of new homes needed, particularly in London and the surrounding area. The South and London see high levels of international immigration, indeed without international immigration London’s population would have fallen by 700,000 in the past decade, which in turn would start to relieve pressure on the wider south as fewer people are pushed out by London’s high housing costs. (see here and here).
However, even if immigration falls, there will still need to be greenfield development in England. Even in the South, only 40 per cent of household growth is due to net immigration.
As the planning debates return later this year, there will once again be those who argue that we can do without greenfield development, that high housing costs (particularly in the South) are just caused by low interest rates. They will argue supply has no impact because this is convenient politically.
One of the key misunderstandings is when people argue because there are 23 million households, whether you build an extra 100,000 or 300,000 homes a year makes no difference to overall housing costs – in either case it is just one per cent of the total housing stock and so a negligible increase in supply.
But it is not just total households that matter in terms of house prices. It is the total number of transactions in terms of homes bought and sold. So you should not measure new build homes against total households but against annual transactions. In recent years, transactions ran at around one million to 1.2 million a year (see link).
Assuming a market of one million sales, the difference between 100,000 homes a year and 300,000 homes a year, or 200,000 homes, is an increase in supply of 20 per cent relative to the same demand. Even 1.2 million sales give an increase of around 16 per cent in supply. So an increase in new builds does help to hold down house prices, all other things being equal, and will have a reasonable impact on prices. This is why supply matters and planning reform matters.
A “brownfield first” approach is very different from a “zero greenfield” approach. It is about actually developing on brownfield rather than just rejecting greenfield development. People will accept some greenfield development if measures to minimise it are in place, not if greenfield is seen as the first call.
Government needs to listen on planning reform – yes. It needs to be flexible – yes. The Housing Minister and No 10 are doing their best to do so. But neither Conservative MPs nor conservatives or liberals more widely should fool themselves – a brownfield first policy is both feasible and desirable. But a “zero greenfield” policy is not.