Guest blog by Angus Gillan
The housing market is arguably the greatest driver of intergenerational inequality in Britain and one of the most prominent socio-economic challenges. Home ownership is popular yet out of reach for many. Young people see affordable housing as a key issue that could improve their lives. But currently, less than a quarter of 18 to 34 year olds are projected to be able to buy a home by 2026.
Reform to our dysfunctional planning system is critical - supply is failing to meet demand. According to government figures the median average number of total builds in England over the last 42 years has been 155,262 per year, just over 60 per cent of the 250,000 needed to meet population growth and household formation projections, and this is set to fall. The last time more homes were built than 2019 (178,300), was 1983 (197,810). The current and likely worsening recession will also adversely impact SME housebuilders who are unable to compete with larger firms that cut back to weather crises, reducing competition in the market, further selling ‘Generation Rent’ down the river.
The 1961 Land Compensation Act (LCA) and the inefficiency of the green belt are blocking home ownership. Current regulations have also created a speculative system that incentivises land banking and stymies housing building. Consequently, not enough homes cannot be built where demand is highest. In Barnsley and Doncaster, thousands more houses have been built than their household population increases over the last four decades. Whereas thousands fewer have been built in growing cities like Oxford and Cambridge. The artificial inflation of land value from planning permission encourages land banking as owners are guaranteed huge windfalls thanks to the LCA. Rising land costs from 1950 to 2012 drove three quarters of the increase in UK house prices.
The Homes on the Right Track report by The Centre for Cities suggests practical reform that, combined with repeal of the LCA, would allow Britain to overcome its housing crisis. All land without environmental value, within a short walk of a commuter station and with a journey time of 45 minutes to a major city’s main railway station would be opened to development. Without the LCA, land can be fairly acquired and landowners can receive a fair price. Less expensive land means developers can deliver affordable, quality housing. Moreover, a greater number of house building firms could viably operate, bringing much needed competition to a less open market.
The plan would also bring tremendous benefits to the economy. Between 1.6-2.1 million affordable homes, close to jobs, could be built across London, Birmingham, Bristol, Manchester and Newcastle. As TPA research fellow Rory Meakin highlighted in a recent article, academics have estimated that fixing the planning could see GDP increase by around 20 per cent. That’s why the TPA launched, jointly with the Adam Smith Institute, a campaign to encourage submissions to the government consultation on planning reform.
Critics often cite that building more homes, particularly in green belt areas, won’t win public support. But by investing in infrastructure, setting standards for aesthetics and protecting wildlife, many naysayers can be won over. Currently small developments squeezed into the commuter belt have not seen rail upgrades, increasing reliance on cars and clogging up local roads - but good transport links are critical. When it comes to building beautifully, polling by Ipsos MORI has found aesthetics influence the support for development - especially when homes are in keeping with the area. Finally, a net increase to wildlife habitat can be created by ringfencing a set amount of development land for green spaces.
As the think tank Policy Exchange restated (while adding lots of important details) in a recent report, Strong Suburbs, residents should be able to agree the best rules and regulations for their streets to make the best use of available space. For example, “A street of suburban bungalows, for example, could agree on the right to create Georgian-style terraces. In many cases, an adopted ‘street plan’ would greatly increase the value of residents’ homes, giving them strong reasons to agree on it.”
By taking bold action to reform the planning system in areas of demand, the government can tackle the root cause of a stalling housing sector. A consensus exists that the status quo is not viable; our current trajectory is socially and economically damaging. The policies outlined above can offer a solution.