20 August 2018

Giving councils carte blanche will not fix the housing crisis


When everyone in politics agrees on something, it is usually a sign that the idea is either very good or very bad. Today something was published which was both.

An array of housing charities and think tanks have published an open letter to James Brokenshire, the Housing Secretary, calling for reform to the planning system. It’s an impressive cross-party coalition: the New Economics Foundation, the IPPR, Shelter, Crisis, Generation Rent, the Joseph Rowntree Foundation, Create Streets, Onward, London YIMBY, even the CPRE. (Boo.)

Their central objection is to the way in which – thanks to Britain’s hideously restrictive and contorted planning system – the granting of planning permission has become the equivalent of winning the Lottery. The stroke of a bureaucrat’s pen can transform a given field from agricultural zoning to residential – and multiply its value by an ungodly amount. In the Centre for Policy Studies’ New Blue essay collection, Bim Afolami pointed out that agricultural land in his constituency of Harpenden goes for tens of thousands a hectare. Residential land goes for more than £3 million.

There is near-universal agreement that this is unfair: that a higher proportion of the value uplift, to use the jargon, should go towards communities rather than the lucky landowners/developers – not least in order to pay for the infrastructure and amenities which might lead people to view local development a bit more kindly.

In recent months, for example, the CPS has – as part of its New Generation project – published three different proposals by different Tory MPs for doing this.

Bim suggested, in New Blue, an extra levy on such land once it goes into the local plan ahead of specific permission to build. Matt Warman, in his paper Who Governs Britain?, proposed a levy based on the final sale value of the land. Chris Philp, in Homes for Everyone, suggested (among many other things) a new system of Compulsory Purchase Orders (CPOs) that give 50 per cent of the uplift in value to the person who was having their land taken for development.

So the first part of today’s open letter is an all-round sensible idea that everyone should support: “We, the undersigned, believe that more of this huge uplift in value should be captured to provide benefits to the community.”

The problem comes with the second part, which proposes that Government should “give local government a stronger role in buying and assembling land for housing, allowing them to plan new developments more effectively, share the benefits for the community and approve developments in places local people accept. Most importantly, they should reform the 1961 Land Compensation Act to clarify that local authorities should be able to compulsorily purchase land at fair market value that does not include prospective planning permission, rather than speculative ‘hope’ value.”

This is the expression of an increasingly popular doctrine, which essentially holds that Britain’s failure to build enough houses is largely or partially the fault of developers and landowners, who are hoarding land, or at the very least drip-feeding properties and land on to the market rather than flooding it. Its proponents would like to see the system reformed so that, essentially, it is controlled by councils rather than developers – with the latter acting pretty much as low-paid contractors to the former.

But there are two big problems here. Anyone familiar with the state of Britain’s councils, and in particular their planning departments, should not be entirely confident that this is not a case of trading frying pan for fire. It should also be uncomfortable territory for Conservatives: I recently met someone who had worked in the housing industry for decades, who confessed to having met just one town planner who voted Tory.

The bigger problem, however, is the second half of that paragraph above – the use of CPOs which take not just some of the uplift from the grant of planning permission, but all of it, and the implication this will happen regardless of whether or not the owner of the land agrees.

When I queried this on Twitter this morning, the senior team at Onward hurried to reassure me that they still wanted to leave developers and landowners with a profit – presumably enough of one to motivate them to bring land forward for development.

But if you arm councils with a power that ensures they can get the land effectively at cost – and choose the land rather than relying on what others choose to apply for – why on earth wouldn’t they use it?

The wider use of CPO powers sounds attractive in theory. But historically, CPO has been reserved for really critical pieces of infrastructure – if you’re building railways or motorways, or regenerating the whole of a large derelict brownfield site like the Docklands. Now we seem to be saying that the housing crisis is of sufficient magnitude that people’s rights to their property should be set aside in the wider interest. (Yes, you’ll get compensated according to the current market rate, which in the absence of planning permission will probably be on the low side. But you’ll also seen your family property seized, and developed upon, with the local council pocketing the proceeds of converting that land to residential use.)

Back in 1975, one of the co-founders of the Centre for Policy Studies wrote: “If a Tory does not believe that private property is one of the main bulwarks of individual freedom, then he had better become a socialist and have done with it.”

Obviously the signatories of that letter – at least most of them – are not attacking the principle of private property. They just want to get more houses built. Yet in the rush to do so, they risk conceding that fundamental principle.

Yes, there needs to be a major shift from a system where landowners and large developers have too much power, and get too many of the profits (though this is as much a result of our broken planning system as anything else). But to go from one extreme to the other, and give councils the power to easily seize land, would fundamentally change how private property in this country operates. If widely used, these powers would also be a charter for legal chaos and challenge rather than more homes being built – which is why the Government should be very wary.

Robert Colvile is Director of the Centre for Policy Studies and Editor-in-Chief of CapX.