Our new paper, Planning for the Future, provides a new way to understand the housing crisis and how to fix it. Using a framework developed by the economist János Kornai, we show that it is not actually possible for the discretionary design of the planning system to work efficiently, and that there will always be shortages and waste.
Our proposed replacement, a flexible zoning system, directly tackles these problems in the current planning framework. Flexible zones which allow a variety of uses will form the building blocks of the planning system, and proposals which comply with the zoning and building regs legally must be granted planning permission.
Since the launch of the paper two weeks ago, we have received lots of feedback and questions about the analysis and how the new system would work. Some of the most common have been included here (with some editing for clarity) with detailed responses – please let us know if you have any others.
1. How can housing shortages be the fault of the planning system when we have over 280,000 permissions unbuilt? Isn’t this about hoarding by housebuilders?
This “landbanking” behaviour in the UK housing sector – where developers hoard inputs (land with planning permission) and produce outputs (homes) slowly – is an artefact of the current discretionary planning system. Land itself is not in short supply, but planning system’s rationing means that land which can be lawfully developed is restricted and the crucial bottleneck in the housing market.
As acquiring a planning permission is fundamentally uncertain due to the planning system’s discretionary design, developers must try to acquire more land with planning permissions than they can use and hoard it to spread “planning risk” over multiple periods. To cover the high price they paid for land, developers build homes slowly to maintain the high prices they need for their product, and they can and must do this because planning system rations and restricts the amount of land which can be developed. This is part of the reason why there are more outstanding planning permissions than homes built every year.
In other words, this landbanking behaviour only takes place in the only part of the economy where supply is managed by a planning system, because it is caused by the planning system. Almost identical behaviour occurred on a much wider scale in the economies of the former Eastern Bloc where production for all manner of consumer goods was controlled by a discretionary planning system.
Under a flexible zoning system, landbanking will disappear. As planning permission will be guaranteed for any proposal which complies with the zone and building regs, both planning risk and the rationing of land will vanish. Developers will not be able to build out slowly to maintain high prices, as competitor firms will be able to swoop in to undercut them by building new homes elsewhere.
There will be a mix of larger and smaller housebuilders in flexible zoning, but small builders in particular will benefit as smaller redevelopment schemes within existing built up areas will be unlocked by a new flexible zoning system.
2. How would planning manage the costs of development to nearby communities?
Under flexible zoning, there would still be a strategic role for planners as the custodians of places and local economies. Planners would have less control over very specific details in individual developments, but they would continue to oversee orderly urban growth at the neighbourhood and community level.
Planners would therefore have responsibility to manage the externalities which arise from urban growth. For instance, flexible zoning would still require the masterplanning of new urban extensions which are introduced into the zoned area; neighbourhoods would each be zoned according to their character and role; designations such as conservation areas would be retained; and polluting and heavy industrial uses would need to be segregated away from communities.
3. How would design quality – a major flaw in our current system – be managed?
Poor design is a major flaw in the current system, and it is closely linked to the housing shortage. The lack of “quantity” means developers feel no pressure to compete on “quality”, and local authorities who are desperate to reach housebuilding targets are prepared to sacrifice that “quality” just to squeeze out a little bit more “quantity”. This implies that ending the shortage will itself resolve many of the quality and design problems we see today.
Under flexible zoning, it will be possible to set out design codes which set out the permitted aesthetic elements such as for facades and materials within a local neighbourhood. Designations such as conservation areas will also remain for architecturally sensitive neighbourhoods.
4. Won’t building more houses make it more difficult to reach our carbon emission targets? What impact will flexible zoning have on the environment?
Urban living reduces the pressure that human beings put on the natural world relative to more dispersed settlement patterns. In cities, people share land more efficiently, and public transport is more viable, which is good both for local habitats and the climate.
But these benefits require the planning system to allow people to use land efficiently. Unfortunately, this is not how our discretionary planning system currently works. Senseless damage to the environment and planet is caused by how our planning system warps people’s decisions and prevents efficient land-use outcomes.
Within urban areas, very few poor quality and draughty homes are currently demolished and redeveloped into nice, new energy efficient homes. Planning’s rationing of development means half of all suburban neighbourhoods in England and Wales build less than one house a year, or none at all. As a result, we have the oldest housing stock in Europe, and enormous amounts of carbon are wasted heating old buildings as warmth literally flies out the window.
As redevelopment of existing urban areas is so difficult, our planning system requires more greenfield land than would otherwise be needed to keep people housed. Unfortunately, the green belt and the current site allocation process for new urban extensions force these new homes which are built often “leapfrog” green areas into car-dependent new housing estates. By blocking development on sites close to jobs and existing infrastructure, the current planning system wastes land and forces people to create far more carbon when they travel day-to-day.
Flexible zoning will not face either of these problems. As development will be much more closely connected to land values and thereby demand for new homes, new housing will share land and infrastructure much more efficiently. By replacing old, worn-out stock with new homes, energy efficiency will increase. And woodlands and wildlife habitats will still be protected separately under this new system. Solving the housing crisis helps save the climate and the natural world.
5. Wouldn’t a nationally fixed 20 per cent levy for affordable housing and infrastructure risk making development in some regions less viable and undershoot in cities and large towns where more could be raised – such as London?
Broadly yes – in areas where demand (and therefore prices) is higher, there will be greater supply of development and higher revenues from a 20 per cent land development charge. This would then mean that places which are currently less affordable, and which would see more houses being built would be able to provide more social housing and infrastructure financed by their own land values.
We could make the political decision to allocate a part of that revenue nationally through a formula to provide some new infrastructure and social housing everywhere. But the principle that investment should be concentrated in the places with the greatest need is an important one.
Furthermore, having a flat national tax on development avoids inefficiencies which currently occur with the Community Infrastructure Levy as it varies by local authority. We estimate a 20 per cent levy will raise at least £96bn just from new homes in walking distance of stations in the green belt near London, Manchester, Bristol, Birmingham, and Newcastle. A clear and consistent levy will rapidly unlock those funds and get more social housing and infrastructure built, faster.
6. Would planners have any discretion under a flexible zoning system?
Flexible zoning would be compulsory and apply to the urban area of cities and towns. Which neighbourhoods get which zone would depend on planners’ judgement and expertise, informed by both the density and use of the area as well as land values.
For awkward cases, a discretionary element could remain. For instance, a much more intense use proposed in an area zoned primarily for residential purposes could continue to require a discretionary process, as could a rural development of a cottage or two outside the zoned, built-up area. But the majority of new housing and new urban extensions would take place under a national, flexible zoning code.
7. Would a national flexible zoning code transfer power from councils to the government? Is this centralisation rather than devolution?
In some respects, central government would have less power – as there is much less discretionary decision-making, there would be fewer, if any referrals to the Secretary of State for individual decisions. But there would be a clearer distinction between the roles of local and central government.
Central government would be the “referee” of the planning system, which sets the zones and ensures they are implemented fairly. Local government would actually apply the zones, and maintain significant autonomy to strategically plan their economies and communities in-line with the criteria set by national government.
8. Won’t flexible zoning undermine local democracy? How will planning reflect the wishes of local communities?
Local input into the planning process is currently poorly organised and undemocratic. Public consultations and potential vetoes for every major proposal give significant power to existing residents (and disproportionately older and wealthier homeowners), but give no voice to the people yet to move into the community who would benefit most from the new homes.
Research shows that the small number of “neighbourhood defenders” who oppose new housing are really motivated by a fear of change. Giving them extra power or more opportunities to block schemes won’t convince them to support new homes.
Nevertheless, democratic input into the planning process is an important part of our system. But it can and should be better organised and more democratic. Under flexible zoning, consultation would be frontloaded into the creation of the local plan. Instead of opposing proposals one-by-one, residents would engage in trade-offs as to which areas, such as woodland, are off-limits to development and which others can experience growth. Councillors would continue to play their role of politically leading the community and brokering agreements within the plan.
This new framework will be more democratic as it will balance more fairly the wishes of existing residents with the needs of new and potential residents. Nobody will get all of what they want all of the time, but that is the nature of democracy. Ending the housing crisis will require power to be shared, and the planning system and local democracy must change to do so.