Rishi Sunak may be agonising about raising taxes to ‘level up’. But that is a false choice, because it omits the magic possible ingredient: growth. And one of the most powerful ways to enable more growth is to permit more development where high prices, driven by demand, are screaming for it. A new paper from Create Streets today shows how the ‘street votes’ policy – now supported by 15 Conservative MPs, among many other people – could generate billions of pounds for the Treasury without raising tax rates.
Those who want to end our shortage of housing in costly places sit in two camps. The first camp – the ‘absolutists’ – see housing as a zero-sum struggle where pro-housing forces must use every trick and tactic to smash the NIMBYs. They point to the 46% of people who say they would be ‘more likely’ to vote for a Government that built more homes. They tend to omit that such support often evaporates when voters are confronted with new development near them; and that the real constraint on reform is not just the national vote, but the 1922 Committee and other selectorates within the existing system. Those forces were so strong that they even persuaded Margaret Thatcher – not famous for her lack of courage – to replace Nicholas Ridley as housing minister after he became too zealous.
The absolutists point to the regimes in Houston, Atlanta, and Tokyo as easy solutions for our housing woes, but rarely mention that, unlike the UK, tenants outnumber homeowners in those cities. That makes the politics of adding housing much easier.
The second camp – the ‘realists’ – understand that the world is not a zero sum game. Building more can make so much profit that, with careful rules and in some places like Tel Aviv or Seoul, it can win widespread support. But the rules of the existing planning system block such negotiations and empower veto players. A tiny minority that hates change has engineered and preserved a system that fails to enable high-quality development supported by the vast majority.
One realist compared the efforts of the first camp to ‘crush the NIMBYs’ with the Polish cavalry’s efforts to gear up to crush the Wehrmacht in 1939. We most recently saw the problem when Mr Jenrick was replaced as Housing Secretary last month after a monumental backlash to the Government’s White Paper proposals on radical planning reform. He is the most recent in a long series of casualties.
The intellectual origins of the realists stem from the Centre for Policy Studies’ Alex Morton. That camp, aware of the history of seventy years of planning reform failure, has worked up new ideas that seek to address the limitations of the current planning system, including neighbourhood planning, and to create new and powerful supplementary mechanisms so that small groups of residents can allow new homes in return for a share of the benefits that, in their view, outweighs all the inconvenience and risk.
The realists’ most notable recent advocate is Steve Baker MP, in the foreword to a new paper published by the Social Market Foundation this week. As Mr Baker eloquently explained on television yesterday, almost every other part of the economy functions based on win-win outcomes: I buy something from you because we both judge that we will benefit from the exchange. The world is, by its nature, not a zero sum game. That is why we are on average a hundred times wealthier than our distant ancestors.
If, in contrast, the rest of the economy functioned like the planning system, you would have to get permission from the government to allow a plumber to enter your home to carry out repairs.
The beauty of a win-win approach is that the winnings can be fabulous. Create Streets estimates that just one such approach, street votes, could generate £9 billion for the Treasury this Parliament, and £52 billion over the policy’s life, without raising tax rates. That could pay for the Northern Powerhouse, the Campaign for Better Transport’s entire list of priority projects to reverse the Beeching cuts, and a range of tram lines.
That £9 billion would come in addition to the £8 billion per year that would flow to local authorities through the proposal to apply the developer levy to such development. Nor does it count the hundreds of billions of additional value that would flow to everyone else in the country, through improved growth from having more homes near to high-wage firms. A chunk of that value would go to the local residents and communities who have agreed to more development in return.
The Government might go a little further with nationally set permitted development rights, but there is only one way to harness the market to improve social welfare at scale, from where we are now: let residents and communities weigh up the benefits of new development and approve more when those benefits outweigh the costs to their community, without harming others but perhaps overruling a tiny minority of would-be ultra-NIMBYs who will fight even change that causes them no harm. That might involve street votes, mews votes, community land auctions, or other things. Those sorts of ideas will start to restore a healthy housing market.
Michael Gove, the new Housing Secretary, has a long and successful history of introducing quietly radical but popular and workable change, like free schools. They allow exactly the type of local experimentation by residents and entrepreneurs that we need to get to a better planning system that can enable levelling up and growth in a popular and lasting way. The way to fix housing is to crush the blob, and let NIMBYism defeat itself.
Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.
CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.