Multicoloured row of houses with differing architecture

A very short guide to planning reform

Senior Analyst Anthony Breach sets out all you need to know about planning reform, looking at why reform is needed, what it should look like, and what actions local and national government should take.

Briefing published on 1 December 2022 by Anthony Breach

1. What is planning reform?

Planning reform is a package of proposed changes that have the aim of increasing certainty for people applying for planning permission to build new homes and commercial buildings.

The Levelling Up White Paper places planning reform within the mission to improve homeownership and housing quality. It follows the Planning White Paper from 2020 in identifying problems with affordability and homelessness that are deepest in London and the South East of England and urban areas more broadly. Planning reform in the Levelling Up White Paper aims to achieve simpler and shorter local plans for England that are easier for local authorities to adopt, a greater role for design codes, and more digital planning to make the process more map-based, all of which (among other changes) will improve the certainty of the planning process.

Centre for Cities has previously set out a proposal for planning reform that would replace the current discretionary planning system with a new flexible zoning system.
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2. Why do we need planning reform?

Britain’s housing crisis is caused by a deep shortage of homes, especially in the most prosperous cities and large towns. We have built much less than other rich countries for decades – for instance, while England currently builds around 220,000-240,000 new homes a year, the highest in decades, France builds roughly 380,000 a year, a decline from a recent peak of nearly 500,000 before the financial crisis. Japan is currently building 860,000 homes a year, even though their population is shrinking.

The English planning system causes this shortage of homes by making it very difficult to build, in two ways. First, it imposes explicit bans on new construction in large parts of the country – by far the most important and costly of these is the green belt, which exists to block the growth of the country’s most economically important cities and large towns.

Second, the planning process for almost all of the remaining land is highly discretionary with nearly all significant decisions made case-by-case. The uncertainty this creates in the development process reduces the number of new homes and commercial buildings that are built, as it is possible to propose a new development that complies with the local plan and nevertheless have it rejected.

England’s system is internationally unusual – most other countries do not have construction bans outside their biggest and most innovative cities, and instead have rules-based planning systems where applications that follow the local plan must be granted planning permission. Introducing these rules-based decision-making processes is the key goal of planning reform.
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3. What would planning reform look like?

Centre for Cities has previously called for a new flexible zoning system, based upon systems in countries like Japan or recent reforms in New Zealand that would replace the current discretionary planning system.
• A brand-new flexible zoning code designed by national and devolved governments for local governments to use in local plans, with a small number of different mixed-use zones corresponding to different types of neighbourhood. For example, skyscrapers would be suitable in a city centre zone and polluting industrial activity in industrial zones, but neither would be allowed alongside homes and light commercial uses in a suburban living zone.
• New rules stating that planning proposals which comply with a zone-based local plan and building regulations must be granted planning permission.
• Local Plans and Local Transport Plans – which are currently different documents – should be merged into the same document, so that planning for development requires planning for infrastructure and vice versa.
• Better organised public consultation and frontloading it in the creation of the local plan, rather than allowing campaigners to block new homes that comply with the local plan.
• Phasing of non-developed land into zoned areas, depending on local population growth, affordability, and vacancy rates.
• Zoning of land in walkable distances around train stations in the green belt for suburban living and with protected green space, which would provide 1.8 to 2.1 million homes.
• Replacing negotiated ‘developer contributions’ towards local government with a flat levy on a development’s value for infrastructure and new social housing.
• Maintaining opt outs and special designations where case-by-case decisions continue, such as conservation areas, national parks, and wildlife reserves to protect environmentally or architecturally precious land.
• Creating ‘safety-valves’ in the system that allow alternative pathways for development, such as the Street Votes or Builder’s Remedy proposals.

Some zoning systems in other parts of the world, such as Ireland and New York City, result in similar outcomes to the English planning system. These are inflexible zoning systems with either “single-use” zones that heavily restrict how land can be used, or retain discretionary review of permits. It is crucial that England avoid these outcomes by creating a flexible zoning system.
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4. Is planning reform deregulation?

Planning reform is sometimes criticised as deregulation. However, the effectiveness of the planning system depends not on how much or little it regulates, but on the system’s goals and whether it can meet them. England needs a planning system that can solve the housing crisis and help increase living standards. The current planning system cannot do this as it is designed to reduce and stop new homes with construction bans and vetoes on development.

Town planning would continue to be important in a reformed planning system, but would have clearer goals and regulations designed to meet those goals. Ensuring new homes are built with the infrastructure they need in a growing economy should be the primary goal of the planning system.
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5. Where would and should the housing be built?

New homes are needed most in and around the most expensive and least affordable cities and large towns in England – primarily those in the South East of England in and near London. If these places are to both provide more suburban homes for families and to use their infrastructure efficiently, then they need to build both out onto fields and up with new mid-rise buildings on their urban land.
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6. Would planning reform harm the environment

Conservation organisations such as the Campaign to Protect Rural England sometimes criticise planning reform as being bad for the environment. Planning reform would though concentrate new homes in and near growing cities, which is the best place to build new homes to reduce the pressure human civilization puts on the natural world. Cities have lower carbon emissions per person than other parts of the UK, and reforming the planning system to build more in and near urban areas is compatible with giving large areas of land over for enhanced conservation or even ‘rewilding’.

In contrast, the green belt induces urban sprawl by forcing new homes to “leapfrog” the green belt to non-urban areas where residents depend on cars for all travel, and the intensively farmed agriculture it protects is of minimal value to the natural world.
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7. Is planning reform good for the economy?

Yes, both in the short and long term. In the short term, planning reform would lead to more housebuilding and create jobs without inflationary pressures. For instance, the eminent economic historian Nicholas Crafts found that that increased housebuilding drove 1/3 of the recovery from the Great Depression, before the current planning system was established in 1947.

Over the long term, planning reform is crucial for stabilizing housing costs, increasing disposable incomes, and reducing house price volatility. It will also improve labour mobility and allow people to move to cities and large towns with higher wages.
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8. How much more affordable would housing become in the UK?

Planning reform will improve affordability, but how much depends on the details of the reforms. Hilber and Vermuelen estimated that house prices in 2008 in the South East of England would be 25 per cent lower if the land supply was as flexible as that as the North East of England, which is still highly restrictive by international standards. If England had a planning system that was more typical of other countries such as a zoning system, we could broadly expect house prices to move closer to the average for rich countries. Only three advanced economies – Australia, Norway, and Spain – have seen faster house price growth than the UK since 1980.

Part of the difficulty in working out how much more affordable housing would become is that people who are currently forced by the shortage to share homes would be able to move out if housing became more affordable. This problem has been getting worse for decades – space per private renter in England fell from 367 ft2 in 1995 to 307 ft2 in 2018, and in London from 329 ft2 to 264 ft2 over the same period, even as homeownership rates fell.

Even if planning reform and the resulting increase in construction meant house prices declined only to the average for rich countries, that would still entail much greater amounts of space, quality, and choice in where and how people in England live than they can afford today.
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9. Don’t we have enough empty homes?

Organisations such as Action on Empty Homes say there is little need to for planning reform, as most of England’s housing problems stem from the number of empty homes. While it may sound like a lot that 240,000 homes in 2019 were ‘long-term vacant’ (empty for six months or more) this is actually a low number – only 1 per cent of homes compared to 4 per cent of homes in the Netherlands, and 6 per cent in Japan. Even in Burnley, the vacancy rate is lower than it is in Tokyo.

Britain has very few empty homes because the shortage has exhausted the nation’s stock of housing. This occurs because the planning system stops new homes from being built, especially in the least affordable housing markets like Oxford and large parts of London.
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10. Is landbanking why England does not build enough?

Some voices, such as the Local Government Association, say that the planning system is not the cause of England’s housing crisis, and instead ‘landbanking’ by developers means that the number of granted planning permissions is higher than the number of homes built and 90 per cent of applications are granted.

However, landbanking is an artefact of the current planning system. As the planning system is so uncertain – as 10 per cent of applications developers make believing they will secure approval are rejected – developers need to hedge against this uncertainty by having a land market that has acquired more planning permissions than can be worked on at any one time. This can be seen in how England’s rate of self-built and self-commissioned homes is one of the lowest in the rich world – if planning was not a barrier but builders were refusing to build and landbanking, self-building would be common.

In a new rules-based planning system, this hedging behaviour would disappear, as the lack of ‘planning risk’ would increase certainty. More developers, including SME and self-builders, would enter the market knowing for sure they could build. The incentive for developers would be to build quickly once they have acquired a site, so as to complete before house prices begin to fall or competitors outbuild them.
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11. What should the housing target be?

England will need to build considerably more than its current target of 300,000 homes a year. At present England currently has 25 million homes and is building about 220,000 a year. If we wanted to achieve the same ratio of homes per person as France has today, England would need to build more than 6 million new homes to clear the backlog, amounting to roughly 600,000 over the course of a decade.

The reason housing targets exist is that England’s dysfunctional planning system makes them necessary. Left to its own devices, the planning system will inevitably undersupply new homes. Targets imposed by central government are as a result required to ensure that local authorities which oppose new homes do not use the planning system to block economic and housing growth. Targets are absent in other countries as they do not need them in their rules-based and functioning planning systems.

Removing the housing targets as some have called for would without planning reform be a mistake as the targets are a necessary “stick” for ensuring that councils with expansive powers to block new construction plan for growth. Unless the Government replaces the planning system with a new flexible zoning system, housing targets should remain, and if anything, the ongoing failure to meet the 300,000 target means that in an unreformed planning system the targets need to be tougher.
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12. How does planning reform affect social housing?

Planning reform would make it easier to build both private and social housing. Housing associations would find it easier to acquire sites for development in a reformed planning system just as other developers would. In addition, more market rate housing would improve affordability for everyone, and reduce the pressure on both social housing and the £29 billion housing benefit bill.
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13. Would local communities still have their say in the planning system?

A major reason why the 2020 Planning White Paper Proposal failed to progress was due to concerns that local community input would be removed from the planning system. Community input is important but should ideally be frontloaded into the creation of the local plan, rather than in individual developments.

Case-by-case comment processes struggle to engage more than a small share of the population that is disproportionately likely to oppose new homes and made up from households that are wealthier and more likely to be homeowners than the wider community. The success of estate ballots in London show that frontloading consultation engages a wider section of community that is on average more pro-housing.

Local plans in a flexible zoning system should continue to be politically-led by local authorities, and local authorities should retain discretion over development in sensitive locations such as Conservation Areas and National Parks.
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14. How would planning reform improve the quality of housing?

The quality of housing in Britain is broadly considered to be poor. The UK’s housing stock is the oldest in Europe and is unusually energy inefficient. Furthermore, the quality of new homes is often the subject of public criticism.

Britain’s housing quality problems stem though from the housing quantity problem. It is currently very difficult to replace old, poor-quality dwellings with new homes due to the barriers on construction, and the lack of homes reduces competitive pressure on landlords and builders to provide a high-quality product from consumers desperate for housing.

In addition, the quality of new builds is damaged by the high price with planning permission, which reduces what developers can spend on construction quality. Increasing the supply of land that can be developed and the certainty of the planning process is essential for shifting housing from a seller’s to a buyer’s market where consumers have the power to have want they want built to a high standard.

Planning reform, which primarily what and where new buildings can be built, do not entail any changes to building regulations, which determine the quality and safety standards of construction. Replacing poor quality stock with new build in a flexible zoning system will improve both quality and quantity, and is compatible with keeping protections for Conservation Areas and Listed Buildings.
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15. How does planning reform affect levelling up?

Planning reform will not directly affect levelling up. Although demand for new homes is growing in some places, such as Leeds and Manchester, housing pressures in areas in need of levelling up are not yet as acute as those in London and the rest of the South East. Planning reform should result in more being built in these places over the medium-long term and is crucial if they are to avoid London’s mistakes and unaffordable housing market, but this would be a response to economic growth rather than a driver of it.

Nevertheless, the economics of planning reform will indirectly help advance ‘levelling up’ by increasing disposable incomes, including in prosperous places. If average housing costs of the least affordable places fall, then as consumption of goods and services increases in response, ‘exports’ from cities with cheaper housing costs will rise to satisfy this new demand.

In addition, addressing house prices through planning reform and building more in the most expensive places will indirectly both reduce wealth inequality between homeowners and renters within London and other unaffordable cities, while also reducing wealth inequality between homeowners in unaffordable cities and those in other parts of the country.
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16. Will the Levelling Up Bill be good for planning reform?

The Levelling Up and Regeneration Bill contains a number of important planning reforms that can only be delivered through primary legislation. Most crucial are Clause 83 and 84, which would clarify responsibilities of central government as a “referee” and local authorities as “players” in the planning system, and reduce the uncertainty and political conflict that it generates. The new ‘Infrastructure Levy’ that would provide funding for new infrastructure from development, replacing the old ‘Section 106’ system, will also improve certainty, and was previously recommended by Centre for Cities.

The Bill will also require developers to provide Commencement Notices that explain what will be built and where to reduce uncertainty in the system for local authorities, and provide measures that encourage local authorities to agree local plans. The proposals to advance the digitisation of the planning system, plus new powers for local authorities to establish strategic plans and use Supplementary Plans will help introduce more rules-based decision-making into the system.
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17. Were Investment Zones planning reform?

Investment Zones, as were announced by the previous Truss Government, were feted as a powerful pro-growth policy due to the relaxation of planning. Although the details of the Investment Zones remained unclear and the planning elements are potentially positive, Investment Zones were an exception to the planning system rather than reform of it.
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18. Would retrofit become easier with planning reform?

One of the big ideas in modern housing policy is ‘retrofitting’ properties to make them more energy efficient, reducing energy bills and carbon emissions. Planning reform would have little direct impact on retrofit, but it would indirectly reduce the financial cost of retrofitting the country’s housing stock by ensuring some old properties are replaced by new and much more energy efficient dwellings.
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19. Won’t planning reform cause a housing price crash?

An understandable fear is that any Government which launched planning reform would unleash a house price crash. But this is mistaken. As it will take years to build the new homes needed to undo the unbuilt backlog stretching over decades, the effect on house prices will be to cause either stabilisation or a slow decline in local prices as homes become available and slowly relieve the pressure on existing stock.

The existing housing market is extremely volatile and experiences crashes in part because the planning system blocks new construction. When interest rates decline, cheap credit goes into bidding up prices instead of investment in more supply. Likewise, when interest rates rise and mortgage payments increase, housing bubbles pop, sending house prices crashing without reducing average costs.

Planning reform would improve this by ensuring that house prices do not increase as much during economic booms due to increased rates of construction, thereby reducing the damage to households and the economy from falling house prices.
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20. Is planning reform too difficult to achieve?

Even people who are sometimes supportive of reform – such as the former Secretary of State for Housing, Robert Jenrick – express fears that planning reform may be too difficult to achieve. Reform has though been making steady progress over the decade. The creation of the NPPF back in 2011 overcame serious opposition, and commercial planning reform back in 2020 encountered little political pushback. In the US, the ‘Yimby’ (“Yes in my back yard”, as opposed to ‘Nimby’) movement is also arguing for planning reform, and has recently achieved political and policy wins across the US, such in Minneapolis, California, and Oregon.

In addition, there are also high costs from not doing planning reform and allowing the housing crisis and poor economic record of the past decade to continue to worsen. Planning reform will not be costly if it works and fixes problems that have gone unsolved in British politics for decades.
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21.  What other changes would make it easier to achieve planning reform?

Achieving the best possible version of planning reform is a challenge but can be made much easier with wider reforms to English local government and its funding system. For example, merging Local Plans (which are written by districts) and Local Transport Plans (which are written by county councils) would be made much easier if local government was unitarized. Likewise, as local government funding is highly centralised and gives poor incentives for councils to plan for growth, fiscal devolution would encourage councils to make the most out of planning reform to pursue local housebuilding.
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22.  How long would it take to agree planning reform?

Comprehensive planning reform could in theory be passed into law within a single Parliament. The 1947 Town and Country Planning Act that forms the basis of the modern planning system was passed two years after an election and gave local planning authorities three years to prepare their first local plans. Other similarly complicated reforms such as local government reorganisation have also taken two years to get through Parliament in the UK and another two years to implement, although if these are combined with planning reform it may take longer to resolve.

However, if a comprehensive bill introducing flexible zoning is passed and implemented by local authorities within a Parliament, the full benefits will likely only begin to be felt in the years after as it will take time to build new homes and commercial buildings and for the market to adjust. Failing to do planning reform means though that the shortage of homes will continue indefinitely.
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