THE BRITISH PLANNING SYSTEM
BY MATTHEW BENSON, DIRECTOR, RETTIE & CO.
 BRITONS LIVE IN SOME OF THE SMALLEST, MOST DENSELY BUILT ACCOMMODATION IN THE WESTERN WORLD; THE CONSEQUENCE OF A NATIONALISED PLANNING SYSTEM IN WHICH CENTRAL GOVERNMENT DICTATES WHERE AND WHAT IS BUILT, THEREBY CONSIGNING THE VAST MAJORITY TO LIVE IN SMALL HOUSES OR FLATS IN HIGH DENSITY URBAN AREAS.
Do the majority of people really want to live in high-rise flats? Wouldn't families rather live in single-family homes with a garden, if they were available? Does it really make sense to constrain the supply of land so much, especially within striking distance of major urban areas? Do Scottish cities really need green belts when the one thing Scotland has in abundance - even in the Central Belt - is space?
Debates on planning quickly descend to the particular circumstance or the concern about the quality of what we build. But before we can tackle the detail and discuss quality there is a more fundamental structural problem to solve.
The "fable" reproduced on page 92 is of course a direct replica of our current planning system. We instinctively recoil at the illogicality of a state controlled system for determining the supply of cars, yet around the dinner table we accept without demur exactly this system for providing our housing. Not surprisingly, it works no better for delivering the houses we need than it did producing the essential goods for Soviet Russia. Without a solution to the fundamental question of supply and demand we will never be able to tackle the issues of quality with which we are rightly so concerned.
A FABLE - "THE CAR AND LORRY PLANNING ACT OF 1948."
The new Labour Government which came to power in 1945 set about creating a democratic socialist state in which the economy was properly planned rather than left to the vagaries of the market. Many industries were nationalised: coal, rail, gas, electricity, steel and, in 1947, a Town and Country Planning Act was passed. Since towns were now to be properly planned, and other means of transport were now publicly owned and properly controlled, it was argued that the production and distribution of motor vehicles should also be planned and controlled, and this was achieved with the Car and Lorry Planning Act of 1948.
The Act set up a system under which the production of cars was planned on the basis of past ownership patterns and no more than this number were allowed to be produced. No vehicles were allowed to be imported, and anyone wishing to order a new car had to wait until a manufacturer had obtained production permission from the local authority on their behalf. The application was considered by the local transport planners and by the local transport planning committee, which could refuse or grant permission. To make the system democratic, people could write in to say why someone should not get permission. Often the objection was based on the fact that the objector did not have a car and did not see why his neighbour should have one. Such people were called NIDDIES from the acronym NIDHI (Not If I Don't Have It).
As incomes rose and the population increased the demand for cars increased, but the number of cars permitted to be produced did not increase to the same extent. It was felt that allowing more cars would create unfair competition for bus and rail. The price of cars rose substantially. It was argued by some that this was because of the constraint on production, but the transport planners thought that this was not so. The constraint on production did not affect the price; the increase in price was solely caused by the increase in demand caused by things like lower interest rates, so they said. And anyway car prices were not their concern. They were concerned with the real economy. It was for them to plan and for the market to follow. People adjusted to the situation of course.
They drove their old cars as long as possible. Indeed it was rare for a car in Britain to be scrapped if there was any possibility that it could be repaired. After road accidents cars were reconstructed which would have been written off as scrap elsewhere. Tourists visiting Britain were often overwhelmed with nostalgia when they discovered car models they had not seen for years in their own countries.
They also adjusted to the increase in the price of cars. People who had cars discovered that far from depreciating in value the price actually increased over time. This increased the demand further as people without a car felt that they had to get a foot on the ownership ladder. Banks were willing to lend money on the security of the vehicle. Of course, as car prices rose people who wanted to buy cars found that they could not afford anything very large and so the cars built and sold in Britain became much smaller than elsewhere.
The transport planners said that this showed that small cars were what people wanted in Britain. The British were different from foreigners who wanted large cars.
Indeed, people had so much invested in their cars that they resisted any relaxation in the control of production because this would result in their cars losing value.
The justification for this came to be that the limitation of car production was in the interests of global sustainability, to reduce pollution and fuel usage. Some economists said that the stock of old cars in Britain polluted far more and were far less fuel efficient than the newer cars used elsewhere. But these critics were ignored, because after all, they were merely economists and what did they know...
THE ECONOMICS OF PLANNING
Full control was only established by the nationalisation of development rights in the 1947 Town and Country Planning Act. What was intended to be a system where the state carried out development to ensure that the population were provided with a good standard of housing eventually became one in which the planning system was used to restrict development, particularly in rural areas. This resulted in higher prices as increasing demand was not met by increasing supply. The only people that have truly benefited from the '47 Act are landowners as the graph succinctly shows. Choke off supply and up goes the price.
People seem to believe that planning constraints are costless. Clearly they aren't. But beyond land prices, there are other serious economic consequences to restricting development.
Our rigid and nationalised planning system is also delivering the wrong kind of housing. In a March 2005 MORI poll, 50% of those questioned favoured a detached house and 22% a bungalow. Just 2% wanted a low-rise flat and 1% a flat in a high-rise block. But houses and bungalows use more land, so while in 1990 about an eighth of newly built dwellings were apartments, by 2004 this had increased to just under a half.
"In a march 2005 mori poll, 50% of those questioned favoured a detached house and 22% a bungalow. Just 2% wanted a low rise flat, and 1% a flat in a high rise block."
Our housing compares poorly by international standards too. Britain has some of the smallest and oldest housing in Europe, and what is being built now is even smaller than the existing stock. Yet despite this, house prices in the UK have risen much more strongly than other developed countries, meaning that despite real growth in our incomes we are not able to afford more and better housing, in the way that we can afford better cars and food as we get wealthier.
"In fact only around 8% of land in britain is urban, half the figure in the netherlands and lower than belgium, (west) germany and denmark."
THE "MYTHS" OF THE PLANNING SYSTEM
The political alliance to save the countryside is very strong, but to be successful there have to be a number of arguments that resonate with voters. In their recent study for the Policy Exchange of which this article is a summary, Professor Evans and Dr. Hartwich summarise some of the strongest arguments in favour of controlling supply and their study throws up some interesting challenges to the usual orthodoxies. For instance:
Britain is a small, overcrowded country.In fact, only around 8% of land in Britain is urban, half the figure in the Netherlands and lower than Belgium, (West) Germany and Denmark. We are living in crowded and dense cities, not a crowded and urbanised country.
Southern Englandis especially crowded, so new development should take place in the North.In fact, the North West is the most urbanised region in England, and the South West and East Anglia are among the least urbanised.
But the South is full of towns...Development is usually near major transport links, giving the impression of over-urbanisation. In addition, there is the psychological effect of travelling between cities - one travels slowly through urban areas but speeds through rural ones, giving a false impression as to the level of development.
We're all getting older and will want smaller houses.In the last 32 years the number of households has risen by one-third, outstripping the growth of the housing stock. Besides, many older people do not want to move out of their houses, and nor should they be forced to.
We need agricultural land to be self-sufficient.Britain has one of the highest proportions of land given over to agriculture in the world, and we produce agricultural surpluses. We are fully integrated in the world economy and rely on imports for almost everything, especially energy - being self-sufficient in food alone is pointless.
Cities are bad for the environment.Interestingly, it seems that the kind of low rise, low density housing that planners and guardians of the countryside dislike is better for biodiversity than monocultural farmland. The Royal Horticultural Society has conducted several surveys that concluded that suburban gardens are the country's "most important nature reserve". A fascinating study in Germany illustrated that the number of bird species present in an area rose as population density increased and that agricultural areas around a city had fewer than 10% of the species that were found in low density sprawl areas.
We need to live at high densities to protect the global environment.The planning system's emphasis on using brownfield land often increases fuel use, as these sites are not always near existing development or people's work places. Taxation is a much more effective tool for reducing fuel usage.
Building on brownfield sites is always better.The number of brownfield sites is heavily restricted, perhaps only 14% of the houses we need could be built on them. If we are only going to use these sites then house prices will continue to rocket and we will be living in very dense, crowded, high-rise accommodation - just what we do not want.
There are lots of empty buildings we could use.Our vacancy rate is very low internationally, and some vacancy rate is required for the market to be flexible. There is a strong argument for saying we would actually benefit from a higher vacancy rate.
REASONS FOR CHANGE
Rising house prices only benefit a small minority of the population - older homeowners who are trading down. Younger generations are deprived of the opportunity to buy houses of a size that their parents bought.
Just as importantly, British cities are becoming increasingly unattractive because green fields outside those cities are saved at the expense of densifying existing settlements. Cities are becoming monotonous agglomerations of small, low-quality dwellings, increasingly provided in tower blocks. Constraints on the supply of land have led to increases in house prices. This accentuates the instability of the economy because people increase their spending as the value of their houses goes up (and decrease it as the value of their houses falls). The increase in land and house prices also makes it less attractive to work, live and do business in the UK. This has a long-term negative effect on growth.
"Despite real growth in our incomes we are not able to afford more and better housing, in the way that we can afford better cars and food as we get wealthier."
CONCLUSIONS
Developers in Scotland claim that demand for new family housing outstrips supply by at least a third. Furthermore, it takes at least two years between obtaining land for development and gaining all the planning consents. So the most important objective for any developer is not necessarily design or quality, but gaining planning permission. Once that has been obtained, given the demand for housing, whatever is built can, by and large, be sold.
But this is only one side of the coin. The combined cost of ever increasing land prices and ever increasing planning delays continue to squeeze margins. Adding excellent design and expensive materials often adds to the risk. Will the majority of those in the market, who are already stretching to pay prices driven ever upwards by land and planning costs, pay even more for good, albeit subjective, design or more expensive natural materials? On balance, they don't.
Before we can get good design and more affordable housing, we have to address the chronic and systemic imbalance between supply and demand. Unless we do, all the energy and economic firepower that should be going into addressing design and price will continue to go into paying ever higher values for land.
Scotlandis hugely well endowed with beautiful, natural landscapes that will never be suitable for housing. We should be making sure that it is equally well endowed with high quality, sensibly priced housing where people want it. Five-year plans for land supply that would have been quite at home in the former Soviet Union are not the way to do it.
This article is a summary of the first of a series of papers prepared for the Policy Exchange by Professor Alan W. Evans and Dr. Oliver Marc Hartwich. A link to the full text of their study can be found on the Rettie & Co. website: www.rettie.co.uk.
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