1 June 2020

How to end decades of planning failure


The English planning system has defeated decades of ambitious reformers. That is because they all misunderstood what it does: they thought it was a system for planning.

The mistake is understandable, because that is what the system was invented to do. It was designed to decant population out of major cities into the new towns that it would create, and redistribute industry around the country.

In reality, despite the best efforts of the planning system to restrict new homes in London, London’s population has been growing for decades, because people choose to share homes if they cannot have one each. The program of new towns faltered and almost died: we have never built them on the scale originally envisaged. And the methods used to try to redistribute industry around the country have turned out to be mainly counterproductive or damaging: by restricting the supply of homes in places with high wages, they have increased regional disparity and inequality. Banning more offices in Birmingham, as the planners did in the 1960s, was sadly more likely to move those jobs to continental Europe or Asia than to Hull, and mainly it did.

So if the current planning system does not plan as originally intended, what does it do?

The biggest effect of the current planning system – compared to no planning system – is to stop people building things. It is incredibly good at doing that; world-beating in fact.

Across most of the south-east, it would be economic and in fact highly profitable to build more well-designed homes that would improve those places, and yet the planning system stops people from doing so. What little development does happen is a microscopic fraction of what would happen, given current price signals, under a better system.

But it is too tempting for ambitious reformers to overlook how popular that is with many voters. Since the original complaints in 1957 about high land costs due to green belt restrictions and Sir Peter Hall’s epic 1973 plea for housing justice, ambitious ministers and governments have repeatedly thrown themselves at the task of fixing the system. They all failed. Thatcher and Ridley failed. Blair failed. Cameron and Boles failed. Theresa May did not even try. And as prices rise, it becomes ever harder to fix.

They failed because they forgot what the planning system mainly does.

In practice what it mainly does, within and near existing high price settlements, is to control development. And homeowners, who dislike change that might risk their biggest asset or harm their community, are generally very happy about that control.

They think of their protection by planning rules against new nearby development as part of their property rights. Good luck to any politician who wants to take away the property rights of two thirds of the voters, particularly when doing that overnight will cause a house price crash greater than any in modern times. You cannot do that any more than you can take away their rights against trespass, or their ancient rights to light. All you can do is reduce their rights a tiny bit, before the backlash overcomes you.

But it does not need to be so hard. Unlike other property rights, and because it was originally conceived as a Soviet-style central planning system, the current planning system does not let people negotiate to give consent with their rights. That is why it works so badly.

The greatest minds to study this problem – Ellickson, Fischel, Nelson, Morton, Pennington – all realised that, now the genie is out of the bottle and homeowners have effective rights to stop most development, the only way to fix the system is let them negotiate those rights away as they choose. Property law worked fine on that basis for centuries until 1939. It will work again when we let people negotiate and trade again. That is how markets work.

There are bright people with the best of intentions within the Government. If they try to repeat the mistakes of the past they too will fail. You cannot run a market system of property rights the way you manage inside a company or a government. Any institutional economist will tell you those are completely different. That is the mistake made by the Soviets, and by dozens of housing ministers since the 1980s.

The knee-jerk answers have all been tried before. They are either so unpopular that they cannot happen, or they will have little benefit at best and backfire horribly at worst. Those who fail to read the history of planning reform are condemned to repeat it.

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

Columns are the author's own opinion and do not necessarily reflect the views of CapX.