'Planning rules pave way for green belt housing bonanza” screamed a newspaper headline at the weekend. That doesn’t sound good for the Coalition – but such an outcome might be inevitable if it is to resolve the contradictory pressures caused by a housing affordability crisis and fierce opposition to development.
The Government is rightly worried about Britain’s housing under-supply. It faces a £21 billion housing benefit bill and a never ending line of people needing “affordable housing”. In opposition, the Conservatives came up with a powerful critique of the failed approach of previous decades. John Prescott, they said, had presided over a system that combined tight planning law with central diktats, imposing housing targets on each area. Instead of trying to force more homes on to people, the Conservatives said that they would create financial incentives which would make councils want to find space for new homes: a carrot rather than the stick. This is exactly the right idea. Greg Clark, the Planning Minister, has been slashing his way through Mr Prescott’s bureaucracy. He and his colleagues are battling against a powerful Whitehall culture that believes central planners know best and will try to divert them into the mistakes of the past.
The panicky headlines at the weekend were caused by something called the Presumption in Favour of Sustainable Development. Behind the jargon is an attractive proposal to reverse the onus of the planning system and create an assumption that people have the right to develop their land unless there is a good reason not to. It is a good idea, but on its own, it will simply trigger a backlash in the areas affected. In fact this presumption has an uncanny resemblance to something called “planning by appeal” in the 1980s, when Michael Heseltine sent out circulars telling councils to accept development. They didn’t, but none the less, the same failed approach was resurrected by the Labour government. On both occasions people rose up against the poor quality housing being foisted on them.
So, how do we stop history repeating itself? The answer is to go back to economic first principles. When new homes or offices are built, there is a cost to those who already live nearby: perhaps the loss of a view, or more traffic. An economist would call this an “externality” and his answer would be to compensate people for these costs. However, the current planning system doesn’t do this. Through a device called Section 106, town councils can ask developers to provide something in return for planning permission. But this lacks transparency and doesn’t really compensate those who are most affected. If you have an ugly new house plonked right outside your window, it’s not much consolation to know that the council will get some money to build new road humps on the other side of town.
Ministers are now groping towards a much better system of “neighbourhood planning”. But initial pilots seem to have been watered down by officials. To get back on track, what is needed is a system in which individual planning decisions are voted on by the people they directly affect. Those who are next to a new development should have the power to say if they want it or not. The right to say “no” is crucial if we are to avoid a Nimby backlash.
But what incentive is there for people to vote in favour of such developments? Aren’t we all Nimbys deep down? What makes this system different is that for the first time there would be a real negotiation between developers and communities. Developers would have to make it worth people’s while to say yes. However, they can afford to do that, because there is so much value locked up by the current planning system. A hectare of agricultural land is worth about £20,000. Because we’ve built so little for so long, if that land gets residential planning permission, its value soars to between £1 million and £2 million. This vast planning gain creates the opportunity to compensate those affected by development.
Spread over a whole local authority, such sums wouldn’t make much of an impact. But concentrated on the surrounding residents, they could. Developers could persuade the affected residents to say yes by both compensating them financially and using some of the surplus to make their developments look better: with nicer houses, a park, bigger gardens or better landscaping.
We need something along these lines if we are to break out of the vicious circle we’re in. “We-know-best” central planners will always push for types of development that people don’t want. For ideological reasons they prefer density, rather than the sprawling leafy suburbs and big gardens that people actually like. Because planning permission is hard to get, land is expensive, so developers cram in as many boxy flats as possible. People understandably don’t like this and so put pressure on politicians to restrict development and tighten planning law. And so the cycle worsens.
Building more doesn’t have to mean an ugly Britain. You can see the proof in Surrey. At 644 people per square kilometre, it is much more densely populated than the UK average (244 people). But the county is generally a byword for comfortable and desirable living. If we get the incentives right, developers will start building what we want. If we go with the grain of what people want, rather than imposing developments that they don’t want, then we can have nicer, greener homes and faster growth. Surely that’s a better plan?