14 June 2018

How to build on this green and pleasant land


Shaun Spiers, until recently Chief Executive of the Campaign to Protect Rural England, has written a fascinating, profoundly significant, and at times deeply frustrating book.

Reading How to build houses and save the countryside filled me with excitement and hope.  But occasionally I had the urge to hurl it at the wall.

It offers compulsive insights into why the opposite sides of the debate on housing – as in so many others – continue to talk past each other, and hints at the interesting challenges for CPRE in the contrast between its “left-leaning” London staff and the Shire Tory component of its members.

For Spiers, beauty, quality and localism need to be at the heart of the housing debate. Building on those with CPRE’s support might help bring about the end of the housing crisis.

He starts with an astonishing quote from Patrick Abercrombie, first Secretary and later Chair of CPRE:

There is no need to stem the inborn desire of the Englishman to live in the country or to have a garden. It should be possible for a stretch of country to absorb a large amount of building without losing its natural character or at any rate without destroying its beauty, though its character may be modified. […]

It should be possible for a just balance to be struck between conservation and development: that certain parts must be preserved intact and inviolate but that others can, after suffering a change, bring forth something new but beautiful, provided a conscious effort is made.

Spiers goes on to recognize that by the time he had joined CPRE, “it was clear that this pro-development spirit had been lost, together with any sense that development could be enhancing […] our local groups were opposing house building at a time when far too few homes were being built across England to keep up with population growth. Why was this? How did our country come to be so bad at getting homes built? And how did house building get to be so unpopular?”

Excellent question, although perhaps attempts to answer it should start with the periods when so much of our most beautiful heritage was built – by the Georgians, Victorians or Edwardians – and not after the Second World War, like most of the analysis.

If you want a good perspective on our housing crisis and think that improving the planning system may be one component of a way forward, then look back to before the modern planning system was created in 1947. The analyst Neal Hudson has shown that, since then, we have never got back to the net rate of growth in the number of homes achieved in the 1830s – before the railways! – let alone the vastly higher growth rate of the 1930s. History did not start in 1947. Nor should your housing graphs.

That is not to say that we should necessarily return to the pre-1947 free-for-all, even if that were achievable in a nation with a strong voting majority of risk-averse homeowners. But let’s at least be honest with ourselves about what changed.

Spiers’ book could also do without a sprinkling of assertions disputed by those doing serious scientific research. To claim that the housing market is the problem, not the planning system, while noting that the current house builder oligopoly does not have the will to build on the scale needed, is to neglect that it is mainly the current planning system that killed the small builders that Spiers rightly says we need to nurture. They built most of the privately-built homes in the 1930s, and a depressingly small fraction today.

It is perfectly possible to say that we need better planning, acknowledging many flaws in what and how things are built today, without calling for wholesale abolition. Blind defence of the planning system as it stands is no more helpful than unachievable calls for its total abolition. The question is what we can do to make it better.

There are other controversies. On the claim that “there is a thin line between saying ‘we need to build where people want to live’ and stoking demand in those places”, one hardly knows where to begin.

Yes, you will stoke the agglomeration and network effects if you create bigger cities by allowing more well-designed homes in high-wage, highly productive places with excellent job and education opportunities. But you may actually slightly reduce wages in high-wage places due to increased labour supply, and any increased demand to live in those places caused by agglomeration effects is tiny compared to the amount by which you will make living in those cities more affordable and raise average wages across the country. Not to mention the social benefits from no longer unfairly pricing the disadvantaged out of the best life chances.

Many are happy to agree that cartels and monopolies are bad, but seem unable to apply that to cartels accidentally created by government. Robber barons extracting rents from monopolies in toll roads or steel are clearly a problem. But needless restrictions on the number of homes built, to the detriment of the poor, the young and society as a whole, are somehow apparently fine and costless, even if there are plenty of ways to build more homes while making both our cities and the countryside better.

No-one knows how much damage the housing shortage has caused to average wages and GDP per head. There are plausible arguments for setting the figure at 25 per cent. It is certainly not zero. Not to mention the massive social injustice.

Spiers comes tantalizingly close to acknowledging the deadweight losses by declaring that “governments should aim for house price stability or even a gradual fall in values”, but never quite seems to settle on a coherent view of the damage.

Reforms based on an incomplete picture are less likely to succeed. The book would have benefitted from more attention to the real science being done in spatial econometrics by Edward Glaeser, Paul Cheshire, Christian Hilber and many others. Economies of scale, network and agglomeration effects are real benefits, not just moving slices of cake around in a zero-sum game. Trying to keep people away from opportunities by needlessly restricting homes where people want to live hurts the whole country.

China’s hukou system requires a permit to live in cities. If we required people to get permits to move within the UK to places like London, and those permits were so needlessly scarce that they had ballooned in value to £3.7 trillion, the economic and social damage would be obvious. Yet because we have disguised those permits within existing homes, that damage is easier to ignore.

Some would prefer to fight those effects, accepting an overall loss of welfare to maintain geographic balance. But it is profoundly unfair to do that by needlessly pricing out the less fortunate, rather than some fairer system of rationing.

Samsung moved its headquarters from London to Berlin because of high housing costs – neither the first nor the last company to do so. One study showed that industrial space in Bristol was more expensive than in Singapore, Paris and Amsterdam. And we wonder why we lost manufacturing industry.

By analogy, should we have fought against the change and urbanization driven by the Industrial Revolution? Would it have happened here if we did? Would you be happier as a 1500s peasant subsistence farmer with no running water, electricity or antibiotics, devastating infant mortality, and a much shorter life expectancy? For that is the analogue of what the current system is trying to do.

Building houses in places with many inexpensive homes and no jobs sadly does not generate economic growth, as Spiers seems to suggest. We already try hard to push jobs to lower-wage places by pricing the young and the poor out of homes, and firms out of offices and factories, with an incredible price gradient. There is a huge and widely unappreciated cost to that.

We must invest in better infrastructure and education to improve the welfare of everyone. But fighting against building homes that give access to jobs and opportunities is shooting ourselves in both feet.

Spiers’ complaints about pushing more development south are not based on the evidence. CPRE, unlike Shelter, apparently has no economist. What we are actually doing is pushing development away from jobs, at enormous human and social cost. But we don’t need to, because there are plenty of ways to accommodate more homes while making existing places better – as, refreshingly, he acknowledges. That is the wonderful breakthrough.

Another assertion, happily, turns out to be contradicted by peer-reviewed research. “As wealth grows, the value of land will always go up even if the population remains stable,” claim Spiers.

Fortunately, that is not the case. Land in one place can be substituted for land in another with fast railway connections, as in the 1920s and 1930s. Land can be used better, as the Georgians replaced hovels with better structures and the Victorians and Edwardians in turn replaced humbler low-rise with glorious mid-rise buildings.

True, land values rose in many places before modern transport (and steel, and lifts) and, later, after inadequate planning system arrived. But prices of copper, water, oil, light, or any of a vast range of other finite things have not risen inexorably, nor prices of land in many different places at different times. Technology is not constant. Assertions otherwise are voodoo.

Yes, land is unique in that it cannot be moved around; but people can, making land in one place a partial substitute for land far away, or adding more homes on top of one another in grand mansion blocks rather than bungalows.

Land with permission to build is incredibly expensive, but land with no permission to build (and airspace where you cannot build higher) is not. If you do not believe we could do vastly more with the land we have, compare a Bloomsbury garden square with a late-1930s sprawling suburb. More of the former would make land with permission far less scarce and expensive.

Farmland was once unaffordable for the average person. Centuries of rising productivity have brought it within reach. A medieval peasant would have killed for the opportunity to buy land for the handful of months’ income for which the median worker can buy it today.

Nowadays, land is not expensive. Precious and to be cherished, yes. Scarce, no.

Planning permissions, on the other hand, are extraordinarily expensive. A plot with zero hope of ever getting planning permission, even in the South East, is generally worth little more than the agricultural value: some £10,000 per acre. With permission to build, an acre is worth millions.

In 2015, the 70 per cent of the UK that is farmland and crops was worth under a quarter of a trillion pounds according to the ONS. The land and planning permissions underlying existing dwellings – a few percent of the UK, or twenty times less in area – were worth £3.7 trillion, or fifteen times more. Most of that value is not land. It is the value of the planning permissions for current homes to continue to exist. Try replacing a house with grassland, getting it designated permanently as Metropolitan Open Land, and then see how much you are offered for it.

Spiers talks, quite correctly, about the various tax and other incentives for homeownership and the needless stoking of demand. Although he acknowledges that we must build more homes, and not just for those in need, he rails against demand and luxury flats and blithely asserts that “the problem is not a shortage of housing; it is how the housing we have is shared out” – which rather neglects the questions of whether the homes are in the right places, and how to actually get to a different way of doing the sharing out in the real world.

Sadly, the book proposes few politically practical solutions on the demand side, still less any that would make serious dents in our housing crisis. And therein lies the rub: unless your complaints about inflated demand are coupled with serious, achievable ways to ration out housing on an enormous and drastic scale never achieved in this country except in wartime, then they are just an excuse not to build enough homes in the right places.

Even if you find such ways, good luck attracting and retaining fast-growing firms whose employees are internationally mobile and don’t wish to live needlessly in shoeboxes.

Demand for second homes in small villages is a harder topic, closer to CPRE’s heart than to those of urban housing affordability campaigners. With the “green wedges” he alludes to and plenty more living space within the city, perhaps demand for second homes would be reduced. There would be no harm in sensible tax reform too. More work is needed.

It might conceivably be true that if “everyone who wants to and is able to move [to the country] does so, it will profoundly damage both the countryside and the towns and cities that they abandon”. But it seems implausible that making housing radically more affordable where great jobs are plentiful – Cambridge, or London for example – will have either effect.

Would so many people choose to move out if they had affordable, beautiful, spacious homes with gardens near glorious rolling parkland in the city? At present we are letting the housing shortage price people out into the countryside. Surely we can all agree fixing that would be a good first move?

What about the politics of housing? Extensive evidence shows that places with more homeowners find it politically harder to get more houses built. Spiers acknowledges that more voters today have an interest in keeping up house prices than 30 years ago, and that politically priorities have changed to reflected that. It is perfectly possible that a planning system that may have coped adequately back in the 1950s and 1960s, when homeownership rates were lower and there was a consensus about building more homes, may need upgrading today.

The “right-wing” think tanks that Spiers rails against need to improve as well. They must try harder to propose detailed solutions within the art of the politically possible, given that the homeowner regulatory cartel has two-thirds of the votes. Such ideas have been even scarcer than new houses for the last 40 years.

Spiers is far ahead of them in facing up to the political realities. “Homeowners have a big financial interest in protecting their assets, and they vote. Renters are less likely to vote […] Rising house prices win elections. […] So, while it really is scandalous that homes ‘earn’ more than their owners, it is mainly so because it is the result of deliberate policies pursued by successive governments.” Quite.

We have a housing crisis because no-one has come up with a way to fix it that is politically attractive and feasible for a politician in power. Finding that is the only way to end the shortage.

So what to do? Spiers’ call for “more” planning seems an unpromising slogan to unify a workable alliance for change. The “less” versus “more” debate has gone nowhere for 40 years.

The only politically winning framing is to push for “better” planning. That requires a recognition that, in a rapidly-changing world, five year plans cannot possibly hope to address all eventualities, and that local or hyperlocal management of the land is best wherever sensible and helpful, to allow planners to focus more time on things they want and love to do, like infrastructure.

Spiers makes various moves in that direction. His emphasis on quality, local control, and binding conditions that are adhered to is politically astute. He correctly notes it is difficult for local authorities to insist on good design because of the risk of appeal. Councils should have more freedom to negotiate and agree with high-quality developers without a fear of appeal, judicial review, or the need to wait until the next five-year plan is written. In that respect, an obsessive focus on writing plans and sticking to them is not necessarily helpful. Good government can respond quickly to opportunities when they arise. Housing that meets local needs is far more likely to get local support.

His points on brownfield land have been debated at length elsewhere. Suffice to say there is only enough brownfield near opportunities if you reform the planning system to enable vastly more improvement of existing places than at present. We have published our suggestions and look forward to CPRE’s. They had better hurry up.

That is not to say that housing should be imposed on local people. With a two-thirds homeowner majority, it is hard to see how it plausibly could be, at the scale needed to end the housing crisis.

The third core theme of Spiers’ book is protecting and enhancing beauty. As he notes, green belt is not an ecological designation. Many gardens are far more biodiverse, and prettier, than much green belt. Many historic homes in the countryside are heartachingly beautiful. Beauty offers a way forward that all sides can live with. Beauty and good design need not be expensive – certainly compared to the cost of housing where it is scarce today.

Spiers spells out the calculus: “If for no other reason than to get people to support new housing, we should aim to build homes that will give pleasure to future generations, which enhance places rather than degrade them.”

It is not clear that any of his specific reform suggestions are the right ones. To his credit, he does not pretend to have a worked-up programme. But they are refreshingly positive and clearly represent a meaningful step change:

As well as opposing inappropriate development, conservationists should propose how to do developments better and where they should go. The aim should be both less damage to the countryside and more new homes. But to make this possible, policymakers must recognise that the current system needs radical change, both to improve the affordability of housing and to make it possible for groups like CPRE to engage more constructively.

That sounds like a big step forwards. When CPRE wishes to talk, we’re ready.

John Myers is co-founder of London YIMBY, a grassroots campaign to end the housing crisis with the support of local people.