Build build build and beat the Germans (again)

• Seizing the chance to reform England’s planning laws could boost GDP by over 20%, meaning the UK economy overtaking Germany in value added per head

• The total value of the UK’s housing stock exceeds the cost of replacing it today by £3.7 trillion pounds

• Much of the current resistance to the proposed new housing targets comes from lack of clarity over what targets will be in each area and fear of new developments forced on residents

• Introduce micro democracy to provide popular, and beautiful housing with gentle densification

A new paper released today by London YIMBY, the grassroots campaign to end the housing crisis, and free market think tank the Adam Smith Institute, argues that the planning system has “failed young people” by not providing plentiful and high quality housing. This has limited job opportunities and undermined our most productive firms. 

While the report praises the Government’s White Paper on planning reform, noting the aim to streamline decision making and move democracy up front in the planning process, author John Myers warns that all previous reform attempts have failed, and clever ideas will be needed. It suggests radical, popular ways for local people to take back control from planners and give themselves more power to develop their own properties.

Unlike all the other laws governing property and markets, the planning system is not designed to achieve win-win outcomes for existing and potential new home owners. The planning system protects homeowners from unwanted nearby developments. But, with homeowners approximately two-thirds of voters, this has meant a blocking majority in many parts of the country to the developments many young people need to access the housing market. 

The shortage of permission to use land for housing in the places people want to live and where the most productive jobs are has hobbled Britain’s economy and inflated the price of housing. The lack of housing is now so severe that the total value of the UK’s housing stock exceeds the cost of replacing it today by £3.7 trillion. 

Countries such as Switzerland have a more responsive housing supply because local government and local people have much stronger incentives to allow more housing. The answer, the report argues, is ‘micro democracy’ provided by street and block votes (mooted in the Government’s White Paper). This would provide enormous benefits for existing homeowners, who could take back control from the planners and opt for gentle densification of their street that boosts the value of their property while guaranteeing high quality design. This would help turn NIMBY arguments upside down with developments becoming a win-win for existing and incoming homeowners.

Street votes are an idea backed by a broad cross-section of organisations, including the Centre for Cities, Create Streets, the Royal Town Planning Institute and the effective giving organisation Founders Pledge. The potential of street votes is also shown by the previous examples of residents agreeing to densification, Myers argues. In Primrose Hill, London, twelve terrace owners agreed to add an additional story simultaneously in 2018. Near Clapham Junction, in 2017, homeowners agreed to demolish their existing block of eight flats and replace them with a bigger, high quality building holding twice as many homes. One-third of new homes in Tel Aviv last year came from similar redevelopment.

The Planning for the Future White Paper represents, the think tank argues, a “once in a lifetime opportunity to do what governments have failed at for seventy years”.

In a year when the economy has shrunk by record levels as governments have locked down communities in response to the ongoing pandemic, it is the ability of planning reform to boost GDP and government revenues without raising taxes that is perhaps most striking. The report argues that fixing England’s planning system could increase GDP by at least 20% over a decade, allowing the British economy to overtake Germany’s in value added per head.

This is, the think tank argues, a prize that should be in the sights of every policy maker looking at planning reform. To get there the Government could rapidly pilot community-led intensification through design codes set at the level of individual blocks and streets, to help achieve the targets in a popular and durable way. 

Report author John Myers recommends three ways to increase the supply of housing in high price areas while maintaining public support:

1. Implement street and block votes: Street or block residents should be able to set design rules to ensure high quality and, if they choose, graceful densification. If a street opts for greater density, all the homeowners can benefit from a capital gain in the value of their property. That would ensure building is win-win for residents, enabling the Government to reach ambitious targets. 

2. Enable land value tax on future large sites: Allowing councils to gradually introduce a land value tax on future large sites would give councils and local people more confidence that targets will not be missed for reasons beyond their control. 

3. Publish target allocations: Publish indicative allocations of the proposed new local housing requirements, showing how they will be adjusted for constraints such as green belt and historic properties.

Report author co-founder of London YIMBY, John Myers said:

“For decades we have failed young people and anyone unable to achieve their dreams because of expensive housing. Planning reform in this Parliament is a once in a lifetime opportunity to do what governments have failed at for seventy years: end the housing shortage and the endless cycle of failed planning reforms. We need to build on the ambition in the White Paper and make new housing win-win. That will ensure high-quality new homes become abundant.”

Head of Research at the Adam Smith Institute Matthew Lesh, said:

“The planning system is a national scandal. It has provided neither plentiful nor high quality housing. It has just driven up the cost of living and, by reducing mobility, blocked access to jobs. This is a huge deal for the broader economy. Fixing the planning system could help the British economy leave Germany's in the dust in just a decade, and repair the economic damage from the pandemic.”

For further comments or to arrange an interview, contact Matt Kilcoyne: matt@adamsmith.org | 07904 099599.

The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

An updated statement on the Chancellor's updated statement

The Adam Smith Institute recognises the need for new financial measures to support areas put under harsher local restrictions.

Following Chancellor Rishi Sunak’s updated statement today, Matthew Lesh, Head of Research at the Adam Smith Institute, said:

“The failure of the Government’s test, trace, and isolate regime has led to renewed restrictions. If the Government is going to restrict the activities of private businesses during a pandemic to stop the spread of a virus, it is right to provide financial support.

“This is, of course, hugely costly and will add mountains to the debt. Nevertheless, it is a one-off expense, at a time of low interest rates, that should have a  longer-term benefit of fewer firms closing, securing the basic relationships in the economy and protecting jobs.

“At some point we will need to allow firms to fail, people to start new ventures, capital to reallocate, and new skills to be built and jobs created. The Government cannot and should not save every job at any time. But Tier 2/3 restrictions are not the time for creative destruction.”

Notes to editors: 

For further comments or to arrange an interview, contact Matt Kilcoyne: matt@adamsmith.org | 07904 099599. 

The Adam Smith Institute is a free market, neoliberal think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

Brits need more than hot air from Boris

As Prime Minister Boris Johnson announces in his speech to the Conservative Party Conference his worry for the scale of interventions in the economy, the need to reboot the private sector, and fix the underlying weaknesses in the British economy, Matt Kilcoyne argues that we need concrete actions rather than more speeches on the matter:

"The economic interventions this year have been unprecedented, but broad support was needed as they introduced restrictions on trading to reduce the loss of lives from a novel virus. The Prime Minister is right to voice discomfort with public sector enlargement. The British people deserve more than just hot air though, the government must commit to a reduction in spending and a reboot of the private sector. To do that we must reduce the cost of employing people, reform the planning system, and reduce the tax and red tape burden on businesses. The private sector, which has borne the brunt of this crisis after months of state restrictions, must be allowed to create the jobs and our future prosperity."

To arrange an interview or further comment please contact Matt Kilcoyne via email (matt@adamsmith.org) or phone (07904099599)