Building On Green Belt
Private house-building in Britain is regulated by the Town and Country Planning Act, introduced by a Labour government in 1947. At the time it was thought that benevolent government planning would provide well-built homes and protect the countryside from the unsightly “bungaloid” sprawl of the 1920s and 1930s, when private house-building in England neared 270,000 units per year (in 2012 the country managed just 89,000 new private homes). Under the planning system, owners’ rights to develop land are strictly controlled. Local councils determine what purposes land can be used for, and planning permission to build houses is only granted according to a strict local plan. On the edges of big cities, green belts designated in the 1940s and 1950s make building even harder.
In the postwar years lots of new homes went up anyway. Urban councils enthusiastically cleared slums and built vast new housing estates, which they rented out to local residents from a waiting-list. But in the early 1980s Margaret Thatcher’s Conservative government all but banned councils from building, while largely preserving the restrictions on private development. In the 1990s environmental regulations made things more complex. Then Tony Blair’s Labour government insisted that post-industrial “brownfield” land be prioritised over green fields, which are usually cheaper to build on.
Successful cities like Oxford, or in the London green belt, land with planning permission can cost hundreds of times more than farming land, more than doubling the cost of a new house. The shortage of land also accounts for Britain’s uncompetitive building industry. Because land is so scarce, house-builders behave like speculators: they devote their resources to finding and buying sites that might get planning permission. Even a small rise in house prices feeds into a big rise in land values as bidding wars break out.
In such a tight market, deep-pocketed builders prevail. Since 2008 the number of small house builders—those that put up between 10 and 30 units per year—has fallen by 50%. The number of big builders has increased slightly. Weak competition means that builders have little incentive to invest in design, which may explain why new homes are often unlovely. And since these firms often operate as little local monopolies, they rarely cut prices: if prices are not suitably high, they tend to undershoot even the low targets set by councils.
To try to break the deadlock, the coalition government has pushed through planning reforms, which include a controversial “presumption in favour of sustainable development”. In practice this means councils deemed too NIMBYish by Westminster can be forced to approve more housing, or else risk uncontrolled speculative development. This modest reform has cost enormous political capital and tied the government up in lawsuits with unhappy councils.
The Labour Party, whose voters are less likely to be homeowners, or to live at the edge of big cities, has plenty of ideas to get building going. It would let councils borrow more money to build social homes on their own land, and possibly subsidise their construction. It would also encourage pro-growth local governments. Not all councils hate new houses—but those that like to build tend to be heavily urbanised already. In places such as York or Stevenage, tightly drawn boundaries prevent growth. Labour would let them expand into their neighbours’ land.
Bulldozing fields is not yet an election-winning strategy, but opinion is beginning to shift. Polling by Ipsos MORI shows that a majority of people now regard rising house prices as a bad thing. Bank of England officials hint that the failure to build enough houses presents a structural risk to the British economy. Falling home-ownership is beginning to affect some target voters: 874,000 couples with children now rent privately, up from just 274,000 in the late 1990s.
Yet the 1947 planning regime has lasted this long for a reason. The gains from lowering the cost of land and building more are broadly spread, whereas opposition is locally focused. And a majority of Britons are still home-owners—especially elderly voters in marginal suburban seats. Change will be slow.