Alex Morton is Head of Policy at the Centre for Policy Studies, and is a former Number Ten Policy Unit Member.
Michael Gove’s levelling up mission is crucial for the Tories at the next election. But planning and housing are just as important for the long-term future of the Conservative party. Homeowners vote Conservative (and always have done), while renters do not – by large margins.
Analysis by Matt Singh here shows this ownership factor is strong even adjusting for other factors (e.g. age). The problem for the Conservatives is that home ownership peaked in 2003 at 71 per cent then fell, though it rose slightly in recent years from 62.6 to 64.6 per cent, despite 80+ per cent wanting to own. As the Planning Bill undergoes examination, a few key points are set out below on both supply and rescuing ownership more widely.
1. Supply is not everything – but it is critical
Supply is not the only factor. The Centre for Policy Studies has argued for long term fixed rate mortgages (see Resentful Renters) for those who earn good money but lack family wealth for a deposit. Immigration and housing policy needs to be adjusted in order to ensure that the Liberal Democrats cannot be pro-migration and pro-NIMBY, which makes Tory MPs fret (see here on what to do).
In addition, damping down housing speculation both from UK and overseas buyers via tax might help – limiting Buy To Let interest probably helped in the late 2010s to boost ownership.
That said, there are limits to non-supply levers to pull, (i.e. interest rates). Gove has to ignore siren voices that planning reform is just too difficult and irrelevant. In the 2010s, fewer homes were built than any previous decade since the 1960s – this obviously impacts prices.
House prices globally rose in recent decades due to low interest rates, but as the Bank of England notes, excluding inflation, richer country house prices roughly doubled, but roughly tripled in the UK. Our supply side failures have exacerbated an asset price bubble.
2. Supply relates to build out – and who and what is permissioned is crucial
Our system of rationing land means the large house builders and land promoters dominate land markets, with over one million plots that could obtain permission locked up in strategic land banks.
Housing actually tracks transactions more than raw land – as the Letwin Review noted, large house builders only build when they can sell homes at a sufficient price, so more transactions and more sales mean more land pulled through to build homes on.
Our report Stamping Down also showed transactions link to new supply very clearly. In our report The Housing Guarantee we noted new housing supply in the 2010s was best explained not by planning restrictions being loosened under the Osborne reforms, but by house builders slowly increasing supply, as they realised they could do this without lowering sale prices and expanding reliance on Help to Buy Equity Loan.
To get to 250,000 plus homes consistently this means three things, as set out in The Housing Guarantee. First, with planning permission house builders need to agree a build out rate with real sanctions for those who do not deliver in normal circumstances. This doesn’t just mean a tax of say £1,000 a year on unbuilt permissions, but loss of land where homes remain unbuilt.
Second, land must be given to a wider range of house builders to diversify the market. You need multiple routes to market, with different tenures (including rental, self-build and retirement homes), more SMEs and smaller sites. We recently proposed more part-ownership for key workers as part of this (see here).
Finally, councils need to be required to put this build out issue at the heart of local plans. It is no good just earmarking a few huge sites that the large builders simply snaffle up and either sit on or at best build out very slowly. Planning for delivery year in, year out, is what local plans should be for.
3. Give greater say to local people on everything but the principle of development
There is a huge amount of money made in the endless shuffling of planning permissions, and in parts of the planning system, a belief people’s preferences can be reshaped by enlightened planners (e.g. anti-car, neglecting popular designs).
It really is a simple dichotomy. You can either have a legalistic and complex formal planning system, or you have a system that says development will happen, but that local people will shape it.
The system either asks whether new homes fulfil policies on sustainable transport, environmental standards, anti-obesogenic environment etc or genuinely asks local people what new homes should look and feel like. Otherwise, if something ticks all the planning policy boxes but local people are not happy, who wins?
And if not local people, they are irrelevant. You have to give power to local people and less to planners to impose on local people. Once planners judge a site as viable in the local plan and add in any necessary constraints (e.g. flood protection), local views should control what that development looks like.
This would turbocharge design quality which local people are passionate about. Gove’s speech to the CPS in 2013 which touched on good design was absolutely right.
Better quality homes mean less opposition to new housing (see astonishing Create Streets polling that shows support ranges from 75 to 23 per cent toward new homes given different pictures of proposed new homes).
4. Nail your colours to the mast on house price rises
Gove should aim that house prices will be no higher in five years now in nominal terms. Not having an explicit target, but acknowledging there is an obvious trade-off between more owners and higher prices.
A major drop in prices would have negative macroeconomic effects, but Gove should not be afraid of saying he wants broadly stable prices and forcing Government to agree – not least as this will have an impact on lending, speculation and so on.
There is an utterly misjudged view that most people want higher house prices. In fact, the most popular view in a 2017 poll was that nationally people wanted the Government to push prices down a moderate amount. This was backed by 59:25 per cent and among Tories by 51:35 per cent.
Price rises were very unpopular – even small house price rises were opposed by 70 per cent and backed by just 13 per cent. And of course since then prices have risen yet more. There is a levelling up aspect here. Too often policy and media debate is set by affluent Londoners with large mortgages, not the typical voter. Broad price stability should be the aim, and small falls are better than small rises.
5. Get some wins in before you bring out the Planning Bill
Gove needs some wins before he brings out the Planning Bill. One quick win could be a capital fund at the Spending Review for each home, released when new homes are started. For example, £25,000 toward infrastructure per home, including roads, schools and GP surgeries. Local communities and councils could then decide what to spend this on.
This funding could be top sliced from existing budgets. Within the huge increase in capital funding up from £70 billion in 2019/20 to £100 billion in 2021/22, assuming 250,000 new builds this would cost just £6.25 billion. This would be a clear sign that the Government was in listening mode.
Similarly, measures above on immigration, on local control, on build out would all help roll the pitch and weaken the opposition to any remaining controversial aspects.
Gove’s new brief is absolutely critical, and the points above just scratch the surface. But this is a complex area with many moving parts. Fortunately, if anyone can tackle this area, it is the new Secretary of State.