Green Paper - The Social Costs and Benefits of Residential Development Control: Who Gains from the Town and Country Planning System?
Dear Yvette and Ed
At audacity we were pleasantly surprised to receive copy of the joint Treasury and Communities and Local Government Green Paper The Social Costs and Benefits of Residential Development Control: Who Gains from the Town and Country Planning System?
It would seem that insights gained as Secretaries to the Treasury, and briefly, Yvette, as the Housing and Planning Minister at the CLG, have led you to seriously consider the impact of a 60 year old system of planning on the politics and economics of housing provision.
With your Treasury and CLG experience you appear to understand that the financial stability of the British housing market, due to the way the locally, regionally, and nationally administered British planning system sustains the value of an artificial scarcity of residential land, means that we will not experience anything like the housing market deflation witnessed in America. Nothing like the housing market fluctuations seen in other countries where land use is less regulated than in Britain.
Confident in that knowledge you are prepared to publicly consider through the Green Paper, we think for the first time, how a financially stable or inflating housing market, based on the local and regional reallocation of nationalised development rights, affects British society.
The Green Paper begins by acknowledging that we have reached a situation in 2008, not envisaged in 1948. The current planning system was instituted with the 1947 Town and Country Planning Act, after Britain’s farmers had given up their freehold rights to sell land for development, in exchange for government food price regulation. Today there is a great untapped resource of redundant farmland being subsidised not to produce food in Britain, within easy reach of existing urban and suburban centres. Land that could be built on and lived in.
60 years ago government wanted to plan to build council housing for rent, and did so in increasing numbers until 1968. From that moment onward, as the British economy was unable to sustain the Welfare State, public housing provision fell, and was contracted to Housing Associations, who steadily built less housing for rent. They also now enter the business of speculative development through convoluted equity share schemes.
In 1948 owner occupation was an aspirational freedom from the landlord, whether private, public, or charitable, but in 2008 it is also a major financial deal for most households. It is evident in the twenty-first century that owner occupation is the majority and preferred form of tenure compared to rental. Also that the “housing market” is far more concerned with the exchange value of existing houses and flats than with the building of new, to the point where the usefulness of our homes, or their availability in convenient locations, seem to matter less.
As a society Britain has become obsessed with the market value of housing. Households seem willing to pay dearly to enter and stay in the housing market, agonise over the minutiae of local planning decisions that may affect “property investments”, and seem to care less about the dilapidations, discomfort and inconvenience of the home. Your Green Paper could not be better timed as misplaced concern about the British housing market suffering from instability in the financial sector leads to widespread talk of a market crash. The artificial scarcity in developable land sustained through the planning system works in Britain to make such a housing market crash unlikely.
You are right to ask who gains from sustaining housing markets through the planning system, since the answer cannot credibly be politicians looking for re-election in a democracy. That is too cynical and simplistic.
You clearly want to evaluate the social costs and benefits of the Treasury sustaining the housing market through the planned restrictions on something as ordinary as house and flat building. The review is to carefully consider whether:
- planning has become an ineffectual system for providing housing that people can afford on their incomes, but must remain so for the sake of the financial sector of the British economy, which lends against housing as an appreciating asset
- inflationary housing costs would have forced wage inflation if the British workforce had been more demanding of higher pay from their employers, which has been to the great advantage of businesses, gaining at the expense of their employees
- attempts to capture the value of planning gain on new development is only possible when completed houses and flats are valued well above their cost of production, requiring existing homes to be valued far higher than their cost of replacement
The Treasury seems to have recognised that the cost of Section 106 agreements as a condition for winning valuable planning approvals, or protracted negotiations for subsidised “affordable housing” provision as planning gain, would all be redundant if new housing could be built freely on Britain’s surplus farmland. That freedom would allow the existing housing market to deflate, forcing house builders to make their profits from construction, rather than through realising the value of planning approvals. Once deflated housing costs might be reconnected to incomes, even in Britain’s low wage economy.
The freedom to build new housing, regardless of how many new homes were actually built, would undermine the housing market as a financial sector. Planning instruments, established 60 years ago for entirely different reasons can be used in the twenty-first century by successive governments to try to sustain the inflated housing market.
Who loses out by housing being an appreciating “security” on a long term debt, rather than paid for quickly as a depreciating utility?
Who would lose out if housing were an inexpensive and upgradeable home, not an expensive “investment” in the process of dilapidation?
It is too easy to imagine the objections from Estate Agents or Mortgage Brokers, those hoping to retire by “downsizing”, or anyone with sufficient access to finance to consider “property investments”. Most people want a home, but the harder question is who really gains from the planning system preventing anyone building a home at a low cost per square metre on a low priced plot of former farmland?
Planners clearly gain a job, but surely many professionals would want to be planning new housing provision rather than acting as an underwriter for Britain’s housing finance and secured loans sector. Is it true that Britain's new house builders are more interested in making their money from negotiating the ever more complex planning process than from the task of building better construction, and faster?
The peculiar British denial of development rights must benefit someone in 2008. Perhaps the Green Paper will tell us who gains from the inflated housing market. The beneficiaries should be identified, because they do not appear to be in the majority.
It is entirely possible in a low wage democracy like Britain that we all want to maintain the “investments” in our homes. The values are not illusory, and equity in the value of the home can be spent under certain domestic circumstances. Yet you have dared to question whether the generally unaffordability of British housing makes any sense, or is of benefit to Britain’s 26 million households.
The joint Treasury and Communities and Local Government Green Paper The Social Costs and Benefits of Residential Development Control: Who Gains from the Town and Country Planning System? is recommended reading. It will open up a much needed period of consultation about who gains from the planning system.
That is one consultation from your government we welcome. You should be congratulated as politicians for asking:
“Who Gains from the Town and Country Planning System?”
A good question deserves a good answer...
Ian Abley 01.04.2008
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