Our economy and housing supply are being held back by planning: Liberalise now

Alex Morton
THE roots of our urban and housing crises began in the 1947 Town and Country Planning Act. This created the current planning framework where all major private property changes are subject to state veto. All land released for housing has to be approved by councils. Councils tell developers what they should build and where it should go (down to the type of bike rack required). For thirty years or so we built just about enough homes, even if the quality often wasn’t great. Councils liked council homes, voters liked cheap rents, and cheap homes for young buyers were popular. In the early 1950s, just 32 per cent owned their home, a very different political dynamic from now.

By the 1980s, home-ownership reached a critical mass and social housing subsidy fell, so the pressure to allow more homes abated. Rising home ownership also created Nimbys (not in my back yard). Polls show home owners are ambivalent about house price rises. They grasp their children suffer when they try to join the housing ladder. But they also oppose generally mediocre development nearby that cuts the price of their home and quality of life. Losing nearby green space reduces house prices by around 4-8 per cent. Mediocre housing may reduce it even more. Undersupply of land for homes means that prices have risen steadily and now average over £1m a hectare, compared to just £20,000 for farmland. On top of this, councils began adding taxes on new development. This means little money is left over to build attractive housing.

Most people want to live in a family house with a car and a garden, in a city suburb. This is what people would be happy allowing near them. Yet this is exactly the type of housing our planning system limits, both through local authorities, that tell developers to build flats without car spaces, and indirectly, by pushing up land prices. The US’s share of population in larger metropolitan areas rose from 30 per cent to 55 per cent from 1951-2009, focused in suburbs. Relentless long-term decline saw our metropolitan areas’ population share fall 22 per cent from 1951-2009. In the first part of the 2000s, almost 1m people left our large cities. Only high immigration prevented serious declines in population. This matters, as larger cities improve worker productivity. A meta-analysis found a doubling of urban population raises productivity about 6 per cent. So someone going from a town of 50,000 to a city of 800,000 raises their productivity 25 per cent – and vice versa.

Policy Exchange proposes liberalisation to allow new city suburbs, but with those nearby having a final veto and with compensation paid to those nearby for greenfield site development, based on what the loss of green fields incurs. On green belt land, mostly just farmland, and where the Campaign to Protect Rural England (CPRE) found only 30 per cent oppose all development, there should be a levy that pays for new parks and public spaces. This is about quality checks within a more liberal framework. It would mean a burst of construction. To combat the National Trust’s objections we should ask: would allowing new Hampsteads, Greenwichs and Richmond-Upon-Thameses be such a disaster? Areas of outstanding natural beauty would be protected; only 10 per cent of England is developed, so we can protect our beautiful natural areas. Within cities we also need less brownfield bureaucracy – if a majority of your neighbours don’t object to changes, you should be automatically free to change your property as you see fit. We need to create a presumption against interference. It’s your property, not the council’s.

Finally, nearly 2m people live in the new towns built from the forties to seventies. If we allow new private sector garden cities, where local people and business want them, this means a surge of infrastructure spending and housing. Allowing compulsory purchase orders of agricultural land at three times market prices would be fair value. Offering large compensation to those who live in proposed garden city areas, and attractive master plans, would help win over local people in a local vote. This would be a win-win-win for the government – pro-growth, more homes in a politically acceptable way, and free infrastructure.

This is the long-term analysis and these are the solutions that Monday’s housing strategy should have argued for. But three key blocks to change exist: the local authority planning system and its vested interests; the dysfunctional development sector it has created; and a civil service that is repeating Brownite-era policy. The tragedy is this government is genuinely united and committed to solving our housing crisis, from the Prime Minister and Deputy Prime Minister down. But we need better analysis if we are to get there.

Alex Morton is a senior research fellow for housing and planning at the independent think tank, Policy Exchange.