24 June 2020

Our Soviet-style planning system is designed to fail – let’s rip it up and start again

By Anthony Breach

As the country begins to think about the road to economic recovery from Covid-19, the most obvious area for reform is housing. Building more homes in expensive cities will create new jobs, grow the economy, and reduce inequality. The need to rebuild after the pandemic is why at Centre for Cities we are calling for a new approach to planning.

The discretionary design of the current planning system, where permissions are handed out case-by-case is flawed. It is not actually possible for such a system to deliver enough homes, yet it has remained essentially untouched since the 1940s.

The problem is that it is eerily similar to the old Soviet-style planning systems of the former Eastern Bloc. Like in those countries, it is not possible for firms to just buy what they need – they must first apply for a planning permission which planners may not give them.

In Britain today, developers can propose something that’s not forbidden by the plan, and lawfully be denied the right to build, creating massive uncertainty.

As a result, our planned economy for housing faces the same problem as the Soviet-style economies: crippling shortages. By using the framework of the economist János Kornai, who studied the links between planning and shortages in the former Eastern Bloc, this undersupply of homes can be explained as an inevitable result of the planning system’s institutional design. A discretionary planning system like ours simply cannot work efficiently.

A new system is therefore required to escape the permanent shortages in housing, much as the former Eastern Bloc needed new models to escape their economy-wide shortages. This is where national government must play an important role by drawing up a new flexible zoning system.

A zoning system is in principle much less uncertain. Unlike our discretionary system, if a developer proposes something which complies with the zoning and with building regulations, then legally they must be granted a permit. This would deliver far more new homes by reconnecting supply to local demand, help dig the country out of the economic hole it now finds itself in, and end the housing crisis.

This model would still ensure that urban expansion proceeds in an orderly way, but it would mean that development is determined by the need for new homes rather than by how much land is rationed out by the local authority – subject to the strength of the local NIMBY lobby of course.

Two things are essential for this kind of new flexible zoning system to work well. First, the case-by-case approvals that are the hallmark of our current “discretionary” planning regime must be minimised. Second, national government must commit to its role as a “referee” of local government’s role in planning places.

But the design of the zoning code is crucial. In the US they are often written to be as inflexible and awkward as possible and there are often too many zones, creating huge housing crises in places like New York City and San Francisco. Instead, the Government here must commit to a flexible zoning code, such as that in Japan.

The UK should have as few zones as possible – no more than a dozen – which each allow a variety of uses and growing intensity of use. For instance, there may be a suburban residential zone which also allows small offices and shops, as well as schools and clinics. There could also be a more intense use, such as a city centre zone where tall office buildings, hotels, and big apartment buildings are allowed, as well as suburban houses and clinics if landowners wish.

This new flexible zoning system would be written by the Government and implemented nationally by local government. By removing the discretionary element and dodging the problems faced by zoning systems in other countries, it will increase the supply of land made available for new homes and use land more efficiently than our current planning set-up does. It could also be matched with other measures, such as support for smaller builders as proposed by Alex Morton and the Centre for Policy Studies recently.

Research shows that the current planning system makes inequality worse in cities and across the country because it blocks new homes in expensive cities. It is not hard to see the social and economic impacts of this: while homeownership remains a distant dream for many young people, existing homeowners – mostly older and living in urban south east England – have amassed huge fortunes in housing wealth in recent years as a result of the planning system’s rationing of new homes.

Any government that is serious about rebalancing the economy and making Britain a fairer place should work to address this. Encouragingly, senior figures inside Downing Street are said to be open to the idea of ripping up the rulebook and starting afresh.

With an 80-strong majority and no election in sight, now is the time to do it. But a failure to do so will further worsen our socio-economic divides and leave the UK to get ever more unequal.

You can read Anthony’s new reportPlanning for the Future: How flexible zoning will end the housing crisis’ here.

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Anthony Breach is an Analyst at Centre for Cities.

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