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For months now, a number of Conservative MPs, including former prime minister Theresa May, have been grumbling over a particular element of the Government’s ongoing planning reforms – the so-called “mutant algorithm” – which if adopted would have seen much more housebuilding in their seats, mainly around London.
A new, replacement algorithm which addresses their concerns was published last month. The new algorithm now focuses housebuilding primarily within big urban local authorities and London itself. But for this change to be successful further changes to the structure of local government and the planning system are required. Failing to carry through on other promised reforms is likely to gum up the housing market and derail an affordable recovery of the economy.
Under the current planning system, local authorities in England are given a new housing supply minimum target by central government which they must meet, or face penalties. This target is calculated by the “standard method” – a formula which divides up the national target for each place based upon demographers’ predictions of local household growth and affordability. Less affordable cities are given slightly higher supply targets in recognition of their higher demand.
The Government initially suggested that affordability now receive a much greater weighting in a new standard method. Unaffordable places would have had to build more. Yet, it is precisely this change – building more in Tory shires – which caused so much turmoil on the Conservative backbenches. This proposed standard method was christened a “mutant algorithm”, and was even the subject of an MP WhatsApp group. The outcry led the Government to change tack and remove the affordability changes from the proposed standard method.
Instead, the Government’s new, replacement standard method will be “left as it was” in 2017 for the majority of England.
But not all of England will see housebuilding left as it was. In fact, Greater London and 19 urban local authorities will now face a 35 per cent “urban uplift” on their housing need figure. As a result, for example, Leicester local authority will see its current plan requirement for annual housebuilding rise from 1,300 to 2,350; Bristol from 1,300 to 3,200; and all of London’s 32 boroughs together from 69,300 to 93,600. This is to some extent a return to the “Brownfield First” policies of previous Governments, and extra funding pots have been created to facilitate it.
It is welcome that the new standard method responds to the urban nature of the housing crisis, and recognises the strategic importance of deepening agglomeration effects in the national economy. But the urban uplift could be improved if it reflected the economic geography of the 20 largest cities instead of their arbitrary administrative boundaries.
For instance, while the guidance recognises that London is able to distribute its housing need across its entire urban area, no other city in England is given this freedom. This ability granted to London should be available to the other large cities as well. Those which already possess a mayoral combined authority, such as the West of England and the West Midlands should have the same urban uplift applied across every member local authority, and the same freedom to reallocate housing need between them.
While the Government claims these reforms to the standard method are part of its ‘levelling up’ agenda, this is an example of asymmetric devolution, with London’s government given greater responsibility and power to solve its urban issues than other parts of urban England.
For most cities though, the challenge is not really about the algorithm or complaints by MPs. It’s that they currently lack the institutions to effectively manage a city-wide approach to planning. This is less of a problem for cities such as Leeds which fit within one local authority and have plenty of undeveloped land.
But for those under-bounded cities like Leicester which have geographies that stretch beyond their core local authority into neighbours such as Blaby as well as Oadby and Wigston, addressing the urban uplift is more challenging. The core urban authorities do not have much undeveloped land which can easily be introduced into the planning system to meet the new and demanding figures, nor the local government structures to be able to share housing need across different jurisdictions.
The key to solving this lies in the Government’s forthcoming Devolution White Paper, which will set out the future of local government in England.
Our Levelling up local government in England report argues that the devolution white paper should be guided by a commitment to introduce consolidated, single tier, mayoral local government with administrative boundaries drawn to match economic geography and a longer term commitment to tax devolution. This would ensure local government has the power to manage challenges such as the urban uplift and put them on a level playing field with London.
But alongside reform of local government, for the new standard method with the urban uplift to be successful will require that the other proposed major reforms of the planning system be successfully implemented. The current planning system cannot handle greater levels of densification at scale, and the algorithm risks the failure of previous “Brownfield First” policies without change in this area.
Our current case-by-case approach to planning decisions means that unexceptional homes are difficult to demolish and replace with more and better homes. Centre for Cities research shows that half all suburban neighbourhoods build less than one house a year, and a fifth build zero. Without addressing this issue, the new standard method will struggle to ensure more is built in local authorities with big urban uplifts such as Birmingham, Manchester and London.
Supply does not have to change a lot within suburban neighbourhoods to improve affordability, so long as the changes apply to most cities. If every suburban neighbourhood (of roughly 700 homes each) added at least three-to-four new homes a year, it would effectively close the gap between the current rate of housebuilding and the Government’s national target of 300,000 homes a year. While individually these increases are not that large, the substantial prize that they can together deliver is not achievable without systemic reform.
The Government’s new suggested “Renewal” areas in their Planning White Paper will make this much easier by ensuring brownfield land in cities can be redeveloped provided any proposal complies with a design code. A system where development can automatically proceed so long as it complies with the rules set out in the local plan should be the goal for those working to increase the supply of affordable housing and achieve urban renewal.
What this means is that, counter-intuitively, satisfying the MPs who complained about the “mutant algorithm” requires the Government to successfully implement the rest of its planning reform agenda. Achieving national objectives on housing supply with the targets that the Government set itself and local authorities last month is not feasible under the current discretionary planning system.
Meaningful and sustainable change in Britain’s economic geography cannot be achieved by the levelling up agenda unless the Government follows through with profound change with how we do planning. The targets the Government has set for local government are ambitious – the planning reforms underway need to be too.
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