Planning system widening North-South wealth divide, finds Centre for Cities think tank

The restrictive planning system has made urban homeowners in the Greater South East more than £80,000 richer over the past six years than those elsewhere in England and Wales

Press release published on 11 June 2019

  • Planning policy has made urban homeowners in the Greater South East over £80,000 richer than those elsewhere in England and Wales since 2013
  • London saw the largest increases in housing wealth, Sunderland the smallest
  • Planning reform is needed to stop the gifting of wealth to homeowners in successful cities

The restrictive planning system has made urban homeowners in the Greater South East more than £80,000 richer over the past six years than those elsewhere in England and Wales, Centre for Cities has found.

In many cities in the Greater South East, where residents typically earn higher incomes and the planning system fails to match demand for new homes, homeowners’ wealth grew by over £80,000 once adjusting for inflation between 2013 and 2018 – £46,000 more than the national urban average.

In Sunderland, housing equity increased by an average of just £3,000 per home since 2013, while in Burnley it was £5,000. In London, housing wealth increased by £122,000 over the same period. This meant that the capital saw an overall real terms increase in housing equity of £550 billion since 2013 – more than every other city in England and Wales combined.

The planning system’s rationing of new homes in areas of high demand drives up house prices in expensive cities, inflating the value of the property that landlords and homeowners hold. Over two-thirds of overall growth in housing wealth has been in the Greater South East, yet it has delivered under half of all new homes.

Because home ownership rates are lower in these cities – just 66% of people living in the private housing market in London own their own home, compared to 85% in Warrington, this has meant that the planning system has redirected wealth to a relatively small band of homeowners and landlords in these cities, who tend to be older. Meanwhile, it has penalised renters in these cities, who tend to be younger, in the form of ever-higher rents.

If the diverting of wealth to a small part of society is to be addressed, then there needs to be an increase in the number of homes built in the cities that most need them.

Key policy recommendations

Reform the planning system: The Government should ensure that housing supply meets demand in popular areas. It should reform the planning system and introduce the flexible zoning system used in Japan and some parts of the USA.

Increase housing supply where new homes are needed: To reduce housing wealth inequality, we must ensure more homes are built in high-demand areas. Despite there being less demand for homes in Telford and Wakefield they have built more homes than expensive and sought-after places such as Oxford and Brighton. Building in places with fewer jobs fails to address more prosperous cities’ housing crises.

Stop subsidising home ownership and tax increases in housing wealth: Despite Right to Buy, home ownership as a share of private housing has fallen in every city since 1981. The Government should stop subsidising ownership, tax housing wealth increases and treat owning and renting equally.

Centre for Cities’ Chief Executive Andrew Carter said:

“Our planning system is fuelling a North-South wealth divide among homeowners. Restrictive planning policies in many prosperous southern cities are gifting wealth to homeowners in the Greater South East.

“This creates two wealth divides: one between homeowners in the Greater South East and elsewhere in the country, and another between homeowners, who tend to be older, and renters, who tend to be younger, within the Greater South East.

“The best way to address this inequality is to build more homes in the areas that have seen the biggest increases in housing wealth. This means radical reform of our broken planning system and challenging the Nimbys whose voices dominate local politics.”

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