What changes are needed to our current model of housebuilding? A new survey aims to gather the views of local residents about housing development and the planning system.
The survey is being run by Dr. Quintin Bradley, senior lecturer in planning and housing at Leeds Beckett University. He has carried out interviews with community groups and the aim of the survey is to get the views of many more people concerned about housebuilding.
The survey asks only a small number of questions but it leaves plenty of room for people to write their views. It asks about housing targets and housing need, the allocation of housing land and the impact of development on the environment.
Quintin says: “I hope my research will contribute to a more informed public debate on our model of housing supply and distribution. My aim is to help communities to have real influence over planning decisions”.
The accountancy regime used by planning authorities in England to provide a 5-year supply of housing land has encouraged land speculation and introduced perverse incentives for landowners and developers to reduce the supply of new homes.
In my new article for Urban Studies journal I argue that planning policies introduced by Conservative governments in England have encouraged house builders to trade land instead of building homes and have created a new industry in the sale of land with planning permission.
In 2019 local planning authorities awarded planning permission for almost 400,000 homes, more than twice as many as are being built. Almost 60 per cent of all residential planning permissions are now held by non-builders: site promoters, landowners and their agents, who sell the undeveloped land to capitalise on its uplift. The length of time taken to build-out sites has doubled, and the number of homes started by the speculative builders appears to have peaked at 135,000 a year. Every year approximately 150,000 homes with planning permission never get built.
At least twice as much land is provided every year for housing than homes started on site and more than 30 per cent of homes with planning permission never get built at all.
The number of homes approved for development has been much greater than the number of houses actually started on site every year for the past decade. The gap has been growing rapidly since 2011 generating an accumulated backlog of over 800,000 permissioned homes that have yet to be built.
At least 30 per cent of these permissions will never be turned into houses, with this figure rising to around 50 per cent in London, according to research by the development consultant Lichfield.
Accusations of land-banking have been vehemently denied by the house-building industry and have not been upheld in any formal inquiry. However, the industry admits that a significant number of homes with planning permission ‘lapse’ each year.
One of the reasons why housing sites ‘lapse’ is because landowners and site promoters take their profits from the uplift in land value without building the promised housing. Getting planning permission for housing can increase the value of land by 100-fold. Government figures suggest that agricultural land worth £21,000 a hectare rises in value to £2,000,000 once it is given residential planning permission.
The top housebuilding companies operate across both land and housing markets and may trade sites once they have planning permission or use the profit from land to support their borrowing.
The lack of responsiveness of the housebuilding industry has been cited as the biggest obstacle to increasing the number of homes built and tackling the increasingly severe crisis of affordability. The recent Letwin report confirmed that housebuilders average a build-out rate of only 50 homes a year per site, deliberately rationing the supply of homes in order to keep house prices buoyant.
While planning authorities have increased the number of permissions for new homes, the industry has failed to respond with any significant boost in production. Yet government continues to regard a lack of planning permission as the obstacle to housing supply.
Planning permissions for 300,000 homes were granted by local authorities last year, continuing a long upward trend in the amount of land allocated for new housing. Meanwhile housebuilding remained steady at around 164,000 completions suggesting construction has plateaued.
According to research by housing charity Shelter, 324,000 homes with planning permission were still unbuilt five years later. Think tank Civitas found that 529,000 homes were still not built ten years after getting planning permission.
National planning policies forces local planning authorities to provide more land than housebuilders require for their current rate of construction. This surplus of permissions enables developers to pick and choose sites with the highest values and to prioritise their profit margins rather than boost supply. It provides compelling evidence that the dominance of landowners and developers in the planning system is fuelling a speculative market in land and increasing the affordability crisis in housing.
UK Government ministers continue to blame the planning system for the affordability crisis in housing. They are not alone. Many economists also say that planning restrictions stop house-builders from building the amount of homes we need.
In April 2019 economist Christian Hilber gave evidence to the Lords Intergenerational Fairness Committee that the main cause of excessively high house prices in England was an inflexible planning system.
In her landmark report, economist Kate Barker said that planning constraints on land supply were the main reason why supply and demand in UK house-building did not work the way market theory says it should.
Barker asked why the house-building industry is so slow to respond to price signals. The answer she gave was that house-building depends on a supply of land and land is rationed by a regulatory system (planning), not by a market process.
Barker’s solution was that planning should behave more like a market. Planners should make more land available when house prices rise.
In her 2004 report to government Barker promoted what we might call the ‘marketisation’ of planning. She called on planners to prioritise the interests of the private market. They should give house-builders a greater choice of sites to develop.
The Barker review led to changes in planning which have seen many restrictions on land supply lifted. But this still has not brought about a substantial increase in house-building. Instead, the Raynsford Review of Planning in 2018 argued it has skewed the planning system in favour of private profit at the expense of environmental and social sustainability.
Raynsford argued that planning serves an important public purpose by regulating the supply of land. A free market in land and development creates environmental and social harm. Planning regulates land to make sure development is sustainable, its benefits are shared equally, it enhances the environment and makes places and lives better.
The Raynsford Review stated: “Market mechanisms alone are unable to deliver a full range of public interest outcomes when confronted with the scale of the real-world challenges facing the nation…Decisions with a lasting impact on people and places should be subject to democratic accountability that goes beyond the exercise of individual property rights”.
Planning plays (or should play) a necessary and beneficial purpose in constraining land supply. The regulation of land makes the housing market more sustainable in the long term.
The solution to a housing crisis of affordability is – we are told – to build more homes.
Housing economists agree, however, that we would need to build an unprecedented number of houses to have any effect on prices in the housing market as a whole.
We would need to build more than double the number currently being built. We would need to build more than the private house-building industry has ever built before (except for a short time back in the 1960s).
And even if we do manage to build this unprecedented number of homes, any impact on price will depend on the house-building industry transforming itself and its supply chain so that it becomes much quicker to respond to demand – more responsive, in fact, than it has been for a very long time. And even then, any change in price would need at least ten years to take effect. And prices would not fall, they would just stop rising as steeply.
Wouldn’t it be simpler and more direct to build houses that were already affordable?
And this is where it gets interesting. Because according to the economist Kate Barker, whose 2004 report for government set the pattern for everything that has come since, in order to effect prices in the housing market, you have to build market houses.
Barker did not consider the impact on market prices of building outside the market – in other words – of building council housing or social housing.
And yet, according to the housing theorist Jim Kemeny an enhanced programme of council house building would have the effect of stabilising prices in the private housing market. In his 1995 book From Public Housing to the Social Market, Jim Kemeny studied the economic effects of council housing in the UK and the European model of cost-rental – a name that describes homes built without profit and distributed on the basis of need not ability to pay. His analysis demonstrates that a mature not-for-profit housing sector has the effect of stabilising prices in the home ownership and private rented sector.
Figure 1 is a well-known graph that illustrates what happened to the total supply of new housing when the UK council house-building programme was stopped in the 1980s. Up until the 1970s the country was building at least 100,000 really affordable homes – on top of the usual number built by the private sector – and distributing them on the basis of need.
What figure 1 also shows – and this point is not often made – is that when we were building around 100,000 council homes a year in the UK, the price of housing in the private sector remained constant and relatively low.
It was only when we stopped building mass council housing, that the price of market housing took off on its inflationary ascent and went into its cycles of boom and bust.
I don’t want to get too nostalgic here but I think we need to be clear that the housing crisis we face is one of affordability.
And when economists say housing is unaffordable because we haven’t been building enough houses – they mean market housing.
But housing is unaffordable because we haven’t been building enough affordable housing. We have not been building enough homes to meet housing need, and we have failed to ensure that everyone who needed a home got one at an affordable price.
The solution to the housing crisis is not building more private market homes. The solution is to build and distribute homes more fairly.
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The real housing crisis is an affordability crisis, so why do we keep saying there is a housing shortage?
When we talk about a housing crisis, we always talk about a crisis of under-supply. We all know the mantra: we need to build more homes.
We know the argument – we are not building enough homes to keep up with household growth and house-building is at its lowest point since before the First World War (and we started saying that back in the 1990s, so this has been going on for a while).
But there is another side to this story. There are more than enough homes to go around, according to Census data, and enough surplus housing space to give everyone in the country their own bedroom, and we now seem to be building more homes than the official projections suggest are actually needed.
Why did we ever think the problem was an under-supply of new homes?
The answer is that a lack of supply is the stock answer of classical economists to problems of affordability.
Our current fetish with housing numbers dates back to the report commissioned by government by economist Kate Barker in 2004.
Barker pointed to rising house prices and a worsening crisis of affordability. She argued that this was evidence of a failure of supply and demand in the housing market. She diagnosed the problem as an under-supply of housing.
What was Barker’s evidence of under-supply? It was the fact that housing was getting unaffordable.
So, Kate Barker’s report starts with what seems to me to be a category error – the problem was seen as an effect. In the classical liberal economic tradition in an ideal market supply increases to meet demand and prices fall. So, if prices are too high, the problem must be too little supply.
But there are many other causes of a crisis of affordability in housing – not just a shortage of supply. Writing in 2016, housing academic Nick Gallent points to a problem with the classical view of supply and demand in the housing market.
Gallent argues that demand for housing and need for housing are two separate things. The market is not dysfunctional because of a lack of supply, but rather because it cannot provide housing as an investment and as a basic need at the same time. If it supplies demand for an investment asset, it needs to maintain high house prices. If it is supposed to provide for housing need, it needs to lower prices, but then it can’t meet demand.
We used to have a solution for this. It was called council housing.
Do we have a housing crisis of under-supply, or a crisis of affordability?
We seem to be confusing the two things.
The current government target of building 300,000 new homes a year depends on the assumption that increasing supply will make housing more affordable.
But what is the evidence for that?
In her review of housing supply in 2004, economist Kate Barker argued that doubling the production of private-sector house building would reduce the rate at which house prices increase. However, to bring about a real fall in house prices would require so many homes to be built it would be ‘undesirable and unachievable’.
New build is only around 1 per cent of the existing housing stock so Barker explained that any change in house prices would be very slow and require very large increases in construction. If rates of private house-building were doubled, an additional 5000 households a year would be ‘priced-in’ to homeownership .
But Kate Barker explained that there would be no effect on house prices at all unless the house-building industry became more responsive to changes in demand. It was the weak response of house building to increases in demand that Barker was asked by government to investigate.
The operation of supply and demand is measured by something economists call ‘supply elasticity’. The UK housing market is relatively unresponsive to demand, and it has an elasticity of supply rating of less than 1.
Only if the house-building industry became much faster to respond to demand – if its elasticity of supply went up from 1 to 10 – would building more homes have any impact on house prices. And the effect on house prices would not be felt until after 10 years, when they would finally start to slow.
Barker took her figures from a report by housing economist Geoffrey Meen in 1998. Meen added that the UK housebuilding industry had never achieved the necessary levels of responsiveness. He concluded that: ‘there is no necessary reason why any increase in housing demand should be met with a corresponding increase in supply.’ Instead, he expected to see any increase in house building lead to an increase in prices to ‘choke-off excess demand’.
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In February 2019 the Secretary to the UK Treasury, Liz Truss MP, one of the contenders to replace Theresa May as Prime Minister, described communities objecting to housebuilding as ‘the worst vested interest we’ve got’. Communities resisting development, she said were the main obstacle to the on-going project to liberalise and deregulate land use planning.
The portrayal of community engagement and democratic participation in planning as an ‘obstruction’ or ‘delay’ is a common theme for a global liberal project that regards planning as an enemy of enterprise. Development rights were nationalised in the UK in 1947 and the planning system remains the last bulwark against free market forces and is therefore constantly under assault.
What was unusual in this speech, was that Liz Truss, MP, presented communities who oppose the private speculative house building industry as the most committed supporters of planning, and of the nationalisation of development rights.
The portrayal of communities resisting development as pro-planning runs contrary to forty years of NIMBY folklore which has portrayed them as selfish and irrational in contrast to the rationality of planning and development.
In its first appearance in published research, the acronym NIMBY signalled the irrationality of objectors who acknowledged the need for development but opposed its location in their back yard. The medicalisation of community opposition into a NIMBY syndrome followed, suggesting that opposition to development was a pathological response to change.
The confabulation of research is evident in North America where the NIMBY literature quickly merged with the studies of the exclusionary effects of zoning in US suburbs, in which homeowner associations were identified as culpable in the promotion of racial segregation. The literature found a receptive hearing in the Australian suburbs where it was used to frame opposition to densification as a barrier to affordable housing development. The same tropes coloured an origins tale of UK planning where affluent rural homeowners were depicted as inequitably restricting urban housing need.
The focus of the NIMBY literature was on the hidden motives behind objections to development. The assumption was that public concerns over the environmental costs and negative impact of development could be discounted on the grounds that they disguised private selfish interests.
In financialised housing markets, interest in maintaining the value of the private home is not peculiar to individual home owners and is encouraged in policy discourse as rational action. The initial investment of homeowners comes under threat from new rounds of investment intended to capture the uplift in value created by home-makers. The possession of a material interest in an issue such as new housebuilding does not invalidate the claim to participate in planning decisions, nor does it preclude the commitment to what might be described as more principled objections, for instance on environmental grounds. Material attachments are the stuff of democracy. People participate in the democratic process because they are adversely affected by issues and care about the outcome. Again, it is worth noting that the NIMBY epithet is only applied to homeowners who are invested in the use value as well as the exchange value of housing: in place as well as property. The NIMBY caricature is never applied to buy-to-rent landlords, or those letting their second homes on Air B&B whose capital is rootless and for whom property is an investment but not a home.
The most bizarre aspect of the NIMBY literature is its presentation of single-family homeowners as the only promoters of private property rights in the planning system. The role of landowners and developers is signally absent in the NIMBY literature. Development is presented as a public good, while the public are portrayed as representing only private concerns.
My argument in this post is that Liz Truss is right! There are particularly strong connections between communities objecting to deregulated development and those promoting an effective planning system. I would go further to say that communities objecting to development are among the last remaining defenders of an interventionist planning system.
These campaign groups can be more accurately described as pro-planning rather than anti-development. They understand that planning is not merely a system for licensing free market development. Planning is about public ownership of development rights and about capturing the value created by development for the good of the public as a whole, and not solely for private interests.
Opposition to housing development points to the irrationality of contemporary planning for housing:
The fact that in some places most new homes are just converted from office blocks without the need for planning permission, with families housed on industrial estates, without play areas, or even pedestrian walkways
The fact that housing targets now bear no relation to housing need and that almost all new housing goes to feed a bottomless demand for investment rather than for a place to call home
And that protected environments are being allocated for housing, not because more land is needed, but because house-builders are able to play the system to get access to the highest value land.
Against this background, communities resisting unregulated development champion democracy in planning. They argue not only that decisions on development should be debated and decided in the most democratic way, but that the outcome of those decisions, especially the value created, should be shared democratically, for the good of society.
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My new paper to be published soon in Housing Studies Volume 35, Issue 3 explores the democratic practices through which housing site allocations are made in neighbourhood plans in England. “The production of a neighbourhood plan for housing site allocations … Continue reading →
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In 2019 I am carrying out national research with groups objecting to housing development. I would like to hear from any community groups who would be interested in taking part in this research through interviews or group discussions.
The objectives of this research programme are 1) to identify the main common elements in the objections to new house-building raised by communities; 2) to test out with communities what changes to the housing supply model would reduce this opposition; 3) to disseminate research that portrays community opposition as rational and founded on notions of public good; 4) to disseminate a critical perspective on house-building that promotes changes to the model of supply and distribution.
The issue of community support for, or opposition to house-building continues to dominate the policy agenda. The release of new household projection figures in late 2018 raised evidential doubts over the government house-building target of 300,000 homes a year, while a new standard methodology for setting housing targets, and a new delivery test have reduced the room for local flexibility over housing supply. The policy emphasis on housing numbers has become hegemonic, but it leaves rational questions unanswered over the importance of affordability, housing type or design standards. In this context the continuing use in academic and practitioner circles of the term NIMBY to denigrate all opposition to an agenda of increasing supply is unhelpful. There is a policy gap in the discourse on housing supply, and a need to provide research that promotes a view of communities as rational in their approach to house-building, and that prioritises questions about the mode of housing supply, and its relation to housing need.
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