Before last year’s election, I really thought Keir Starmer might go big on housing. A Labour government with a big majority could scorn the howling of Conservative and Liberal Democrat backbenchers and drive through development where it’s desperately needed: Britain’s commuter belts.
It did not take long for the shine to start coming off that naïve optimism. In the run-up to polling day, I wrote here about the uninspiring bureaucratic reality that lay beneath Labour’s rhetoric about new towns and the ‘grey belt’. When no planning bill made it into Starmer’s first King’s Speech, I suggested it might end up being the moment his government failed.
But at least it still looked as if they were trying. New towns are a bad idea, but someone who truly believes in them is at least making a sincere effort to tackle the housing crisis. The grey belt is potentially a very good idea.
In both cases, the problem seemed to be conflicting instincts: potentially bold policy proposals getting bogged down by proceduralism and everything-bagel attempts to do too many things at once. I even wrote a short paper for the Adam Smith Institute setting out how Labour could refine and deliver on those bold proposals.
Starmer’s latest announcements, however, have crossed a dreary Rubicon. These are no longer good ideas, poorly operationalised. They are very bad ideas, ideas which exacerbate the very causes of the housing crisis and will make that crisis worse. They are ideas inspired by a discredited conspiracy theory, ‘land banking’, which refuses to die.
And perhaps most embarrassingly for the Labour Prime Minister who handed the Conservative Party one of the most crushing defeats in its long history, they are ideas stolen from the Tories.
You can be forgiven for missing that last part; Rishi Sunak’s 2022 leadership manifesto is rightly forgotten. But in it was a variation on the use-it-or-lose-it approach which Starmer is now adopting. The difference is that Sunak’s proposal was confined to financial penalties, whereas the Prime Minister proposes not only that but to let councils seize land and freeze out developers they don’t think are building fast enough.
All of this is justified by the idea that developers are ‘land banking’ – that is, buying up land, getting planning permission and holding on to it to sell it on at a higher price. Those who peddle this line point to the large number of sites with permission that aren’t getting built.
It is, however, nonsense. Developers ‘hoard land’ because they need a constant pipeline of work, and our discretionary planning system means that they cannot be confident of being able to develop a site until they’ve got it completely over the line. A developer who built out all their current sites would run the real risk of ending up with zero projects.
What about the claim that they are trying to bid up land values? They don’t need to: land with planning permission is extremely valuable because it is, relative to demand, extremely scarce. This is one planning-related reason house prices are so high, as the cost is passed on to the end buyer. Another is that margins on completed projects need to cover the sunk costs on all the projects that developers spend millions failing to get through planning.
You don’t need to take my word for any of this. The Competition and Markets Authority debunked land banking in a comprehensive report just last year (here’s a summary). Or you could read any of three different reports from planning consultancy Lichfields. Or this explainer from Centre for Cities.
Use-it-or-lose-it regulation for housing is bad on its own terms, too. It hugely increases the risk to a developer of taking on a site; the most likely outcome is that this further pushes up costs (which will be passed on to consumers) and makes developers more risk averse, slowing development. These dangers were first identified in the Barker Review, which published its final report in 2006.
So too will the Government’s plan to introduce ‘a new rule that makes mixed tenure (a mix of affordable and market-rate homes) the default for large housing sites’. ‘Affordable’ homes are sold below market rate. Guess how a developer makes up the necessary profit on a site? Pushing up the cost of the ‘market-rate’ homes… or building fewer such sites.
But the worst, remarkably, is yet to come. For the Government is doing all this via the worst means it is possible to conceive: giving more power to councils.
Councils are at the root of Britain’s planning crisis. Under the regime created by Clement Attlee’s Town and Country Planning Act 1948, they have been invested with huge powers to which they are not suited, and into which they have not grown. Local politicians, beholden to an active minority of residents and with nothing to gain from big-picture thinking, have little incentive to permit development and every incentive to block it.
Labour are not only proposing to give councils new powers to harass developers and stymie development (and even freeze a developer out altogether), but ministers couldn’t even be bothered to work out the details of their own scheme. The Government has refused to set out any guidelines about what a ‘reasonable rate’ of buildout – i.e. the pace developers need to avoid penalties – actually is!
That’s right: every single local authority with this power will be able to set its own rate, and change that rate at will. How can any thinking person, confronted with such a proposal, think it will increase development? The trivialisation of Parliament strikes again.
This is a government trying to substitute the increasingly horrifying prospect of Britain’s problems with a canvas horizon in which long-standing problems are all the fault of fairy-tale baddies, who can be painlessly bashed until things get better. It is trying to cure a patient with a Fentanyl-strength dose of the treatment that is killing them. In other words, it’s madness.
Somebody once described the Starmer Government to me as ‘the closest we have ever come to direct rule by the Civil Service’. That might, at this point, be a slur on civil servants. But it is without doubt a government betting the house on doing the same things we’ve been doing for decades, even as that house collapses around all of our ears.
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