Land-banking and housing targets are artefacts of the current system – planning reform is worth doing to solve the problems which underpin them, and numerous others too.
At the start of this week it was reported in the Daily Mail and the Times that Government backbenchers are attempting to “force a climbdown” on the Government’s proposed planning reforms.
Centre for Cities has previously set out why some kind of planning reform is necessary to solve the housing shortage. The concerns reported earlier this week amount to defending the status quo by focusing on two arguments to oppose new reforms – the first is the supposed problem of land-banking, and the second are a series of “new” mandatory housebuilding targets.
The good news is that reforms should reduce – or eliminate – both.
Land-banking – when a developer acquires a site or a planning permission, but do not immediately develop it – has repeatedly been raised as an explanation as to why we do not need planning reform. The argument is that land is being held back from development by its owners. Yet the current planning system itself causes land-banking. It is not a separate problem.
The current, case-by-case planning system is unpredictable and risky. Developers in response need to acquire more land than they can actually use to give themselves a safety buffer of projects they can always work on, to protect themselves from the risk of a denied planning permission.
This is why we only see “land-banking” or similar behaviours in the market for developable land: it is the only part of the economy where production is controlled by the discretionary granting of permits for inputs. Other industries do not need to hoard inputs as they can always acquire them with certainty. For instance, Toyota does not “steel-bank” and Heinz does not “beans-bank”. As they are regulated by the state through rules, rather than case-by-case permissions, these producers must and can only make a profit by using their inputs as efficiently as possible and selling as many of their products as possible.
Likewise, if we had a more rules-based planning system – which is what the Government is proposing – land-banking would diminish or disappear. Those who are worried about land-banking should support reform.
The other major complaint is directed towards housebuilding targets. MPs are upset by the idea that “new” housebuilding targets for local councils may be mandatory, and like the suggestion that the targets should be voluntary.
The irony is that the housebuilding targets already exist. In fact, the MPs who opposed planning reform last year were able to secure a commitment from Government to keep the existing targets (outside of certain cities, which saw a boost). Opposing new planning reforms because of targets that we already have does not make much sense.
Neither does the suggestion that the targets become “voluntary”. If the targets were no longer mandatory, then they would no longer be targets. The reason we have the targets in the first place is because there is a housing shortage. And the reason there is a shortage is because the current planning system rations the number of new homes that get built. Opponents of targets should support reforms to build a new system that can reconnect supply to demand, which will reduce the need for any targets.
Getting planning reform done will be a political challenge. But unlike other difficult reforms, fixing housing has the benefit of making numerous other policy problems easier.
Cheaper housing means that a slice of the £22bn housing benefit bill can be spent on other things; that public sector wages will go further and be felt to rise in real terms in and near unaffordable cities; and that more construction jobs will be created over this recovery. With a tight Spending Review around the corner, planning reform is one of the few options available to politicians that has a small price tag and big benefits.
Defending the current planning system is a legitimate political choice, but one that should be made explicitly and in the knowledge of the costs it entails. MPs who either want to end England’s housing crisis, or secure wins in other policy areas, should support the principle of planning reform, and then get stuck into the debates on how to make it a success.
Empty houses and flats put pressure on landlords and property sellers so if we want to solve the housing crisis we need more vacant homes - not less.
Landbanking is caused by the current discretionary planning system. A new flexible zoning system will end landbanking and the housing crisis.
Anthony Breach explains how the planning system causes the housing crisis and why a flexible zoning system would fix it.
The UK should introduce a flexible zoning system to build more homes and end the housing crisis argues Anthony Breach in the final paper in his series critiquing the planning system.
Leave a comment
Be the first to add a comment.