As the spectre of a general election rears its ugly head, talk of Proportional Representation (PR) only increases. Many believe now that First Past the Post must go, whether due to its effects on smaller parties, its Conservative bias, or the existence of unaccountable safe seats.
However, PR isn’t just about counting votes. Research over the years has tied more proportional voting systems to a range of policy outcomes, from lower income inequality to more effective action on the climate emergency.
Less research has been done so far on the impact of voting systems on the housing sector. However, there are a few compelling reasons that making every vote matter could at least help a policy system wracked by decades of inaction.
Whose votes matter?
First Past the Post creates an unequal democracy, where voters in marginal constituencies have more power than those in safe seats. ‘Pork barrel politics’ often result, where officials use the power of the state to advantage voters in these marginal areas.
Anecdotal evidence exists of this happening in housing, of councillors lobbying to build more in safe wards, and to avoid construction in more marginal areas. The policy outcomes of ‘NIMBYism’ are long-documented, but its politics are only viable in a system which gives certain areas more electoral weight than others.
Perhaps the most notable case of electoral manipulation through housing strategy was Westminster’s ‘Homes for Votes’ scandal, where the Conservative council renovated homes in target wards to increase their value and drive away those seen as potential Labour voters, and relocated homeless voters to safe wards.
What’s more, as urban constituencies become Labour strongholds and electoral battlegrounds move to suburbs and towns, those who are at the sharpest end of the housing crisis, particularly the young, have little electoral outlet. All ten of the safest constituencies in the country in 2019 had median ages substantially below the then national average of 40.3, going as low as 27.9 in Birmingham Ladywood. These constituencies also include significantly more private renters, while homeowners disproportionately live in marginal seats.
As we see policymakers shying away from building in electorally salient suburbs, and instead further densifying city centres, we can see that our democratic institutions have an impact on our policy outcomes. In such a geographically centred sector as housing, this is only too clear.
Who governs
What’s more, systems with single-member districts like First Past the Post encourage parties to select candidates closer to the district’s median voter, rather than to select a balanced slate of candidates who reflect the electorate large. This overwhelmingly leads to representatives who are older, whiter, and more likely to be male than the population at large.
Given that home ownership is higher among the White British demographic group and among older people, this creates a governing class more similar to those who already own homes than those seeking to get onto the property ladder.
Proportional Representation improves the age, gender, and ethnic diversities of the legislatures elected under them. Devolved assemblies elected under PR in London, Wales, and Scotland, for instance, all have a consistently higher proportions of female members and members from ethnic minority backgrounds than the MPs from the same areas elected under First Past the Post.
Moreover, First Past the Post favours right-wing governments over more progressive counterparts. In the UK, Labour has received 40% of the vote to the Conservatives’ 41% since the second world war. But it has been the Tories who have been in power for two thirds of the time.
Looking internationally, research by Holger Döring and Philip Manow showed that countries with majoritarian systems have right-wing governments 63 per cent of the time, while those with PR do so 44 per cent of the time.
Given that left wing governments are often more ambitious in housebuilding, we can see that not only does our electoral system make our politicians more likely to represent homeowners than renters, but it actively encourages Conservative majority governments which suppress housebuilding.
A different kind of politics
The kind of politics which Proportional Representation encourages is also one which the housing sector desperately needs.
For too long, the housing debate has been polarising and riddled with short termism. Pro-housing Ministers like Michael Gove and Robert Jenrick were often attacked as in the pockets of developers, while anyone with objections to new developments risks being caricatured as a NIMBY. Meanwhile, plans to reform the planning system are constantly moderated or ditched altogether, as the concerns of the next election trump long-term considerations.
This is not helped by First Past the Post. Majoritarian systems often lead to dramatic changes from one government to another, and with these changes come considerable policy changes. Governments know that they may only be in office for five years, and so short-term success often triumphs over long-term planning.
Meanwhile, parties are actively encouraged to emphasise their differences rather than their similarities. Under a plurality system, it is often more important for parties to maximise their base vote, rather than reach across to floating voters.
In comparison, Proportional Representation leads to less polarising campaigning, as parties are not just focused on winning votes in the election, but about presenting themselves as credible governing partners. Systems of shifting coalitions also enable long-term policymaking based on consensus from across the political spectrum, rather than the transient dominance of small chunk of it for five years at a time.
After years of unhelpful binaries and policy stagnation, the housing sector is in desperate need of long-term stability and progression. Ending First Past the Post’s grip on politics, with its imbalanced electorate, hegemonic political class, and polarisation and short termism, could well be a start. Want to end the housing crisis? Making every vote matter could well help.
Progressive Labour politicians should be leading the way on the delivery of gentle density and missing middle housing, not calling for bans on modest flats and apartment schemes.
Labour is missing a trick not leading on the creation of walkable urban living in communities dominated by single-family homes. Known as the ‘Missing Middle’, these housing options represent a whole variety of built forms. Built form that is compatible in size and scale with lower density neighbourhoods. It also provides diverse housing options that supports local shops, public transport and community-serving amenities. Middle housing would form part of a sustainable approach to the growing demand for walkability in our communities and the social need for housing.
What is ‘missing middle housing’?
Daniel Parolek argues for the reintroduction of these concepts in one of Planetizen’s top planning books ‘The Missing Middle’. Described as ‘middle’ because it sits in between mid-to-high-rise apartment buildings and your typical terraced, semi-detached, or detached homes. But many of these housing options have since gone ‘missing’, disappearing from new building stock figures or not being measured at all.
Whether young couples, teachers, paramedics, single professional women or baby boomers, many seek ways to live in a walkable neighbourhood. Many people also seek to live without the cost and maintenance burden of a terraced, semi-detached, or detached home. Or simply cannot afford to live in one. The ‘Missing Middle’ solves the mismatch between what is currently available in UK suburbia and the desire for walkable neighbourhoods.
Sadly, both Labour and the Conservatives are lacking in leadership in support of this type of built form. Instead, as we have seen from Croydon to Churchfields, local parties are kowtowing to NIMBYs in focus groups. These people trick them into believing that the real enemy is the person living in what are often the most affordable forms of accommodation. Flat dwellers and those residing in sub-divided houses.
We are preventing homes for those without children
Record numbers of women are reaching the age of 30 child-free, more than half (50.1 per cent) of women in England and Wales born in 1990 were without a child in 2020. This is almost three times higher than the figure in 1941 where 17.9 per cent of women were child free. Bearing this in mind we know that more households will be without children. Ignoring middle housing means we fail to provide for those who cannot afford to live in a family-sized house on their own.
But are young, highly educated, technology-driven millennials who desire mobile, walkable lifestyles that are prepared to exchange space for shorter commutes and mixed-use neighbourhoods a cause for concern? And does building new maisonettes, sub-divided townhouses, courtyard apartment schemes, or two to four storey apartment blocks really undermine the character of an area?
The correct answer is no if constructed to decent home standards. Politicians purporting to support policies that just focus on the three-bed family home are simply out of touch. Failing to address the needs of a shifting demographic, all based on an outdated myopic view of the world.
For the most part of the last century multi-unit or clustered housing types have been considered compatible with our communities. Often missing middle housing types have consisted of smaller units. This achieves higher density while maintaining connection to the streetscape without needing costly items such as lifts. Construction of such nature can come at a lower cost and increases build efficiency. It allows the creation of gentle density neatly placed into current residential and mixed-use development patterns.
Labour must not ban flats under any circumstances
To achieve real housing affordability, Labour cannot be standing on myopic outdated views such as “build houses, not flats”. The simple fact is we do not have enough of missing middle housing, which includes flats and sub-divided housing.
All too often apartment blocks with four to eight flats over four floors are said to be “too big”. Cited by those already well housed and more privileged than their broader communities. But we must choose our target base and we must draw the line somewhere. If we want to win elections should we be courting “would be” Labour voters who really want nothing other than to prevent change, or should we ask ourselves are these converts to our values, or are we traitors to ours?
If Labour wants to win marginals it needs to appeal to those who have Labour values inside them. Not by dragging out its stall to those who fail to recognise the damage caused by making our housing shortage worse. After all the middle aged, not the middle class are the real swing voters.
Housing wealth inequality is a key driver in the reduction of social mobility.
Every child deserves a chance of economic success, no matter what their background. In England inheritance has become an ever-growing share of national income since the 1970s. It is these inheritances that are to blame for increasing wealth inequality between those with richer and poorer parents. We know there are substantial inequalities in the distribution of housing wealth in Britain. Often related to social class an income.
Sadly, stringent restrictions on new housing supply effectively limit the number of workers who can access the opportunities to create this wealth.
This article explores to what extent attempts to reduce housing wealth inequality can tackle these issues and help win Labour soft Tory votes?
Neighbourhood factors and wealth distribution make or break upward mobility
We know from studies in the United States that if a child moves to a wealthier neighbourhood, it increases the likelihood that the child would go to college. It also increases earnings on average by over 30% by the time they reached their mid-20s. We do not know exactly what the causal factor is in these studies, whether it be going to better schools or engaging with families with higher socio-economic status. But what is clear is that keeping people in places where earnings and job opportunities are not as good hampers social mobility and exacerbates wealth inequality.
Living in England means parental wealth is distributed extremely unequally. One fifth of people born in the 1980s have parents with wealth ‘per-heir’ of less than £10,000. Yet a quarter of people have per-heir parental wealth of £300,000 or more, while one in ten have £530,000 or more. Education and region are strong predictors of parental wealth. Children of Londoners have parents with over twice as much wealth, on average, as those with parents living in the North East such as my own.
Land use regulation is linked to house price increases, restricts the movement of labour, and is a causal factor of rising wealth inequality
It goes without saying policies that successfully redistribute these inheritances would have large effects on inequality and social mobility for later-born generations. The OECD recognises that land use determines health, environmental, social and economic outcomes. Arguing that rising inequality in recent decades is explained by “rising land and property prices”.
Even small changes in valuations of land and property can have major consequences on the distribution of wealth. Meanwhile we know increases in land and property prices tend to benefit older and wealthier households. This often comes at the expense of younger and poorer households.
For most of the 20th century workers moved to areas where new industry and opportunities were emerging, with farmers and the like moving from rural settings to cities. In the Great Migration of the United States some six million African-American workers left the South for factory jobs in cities like Chicago.
Yet when housing supply is highly restrictively regulated in certain areas, house prices are higher and population growth is smaller relative to the level of demand. Professor Edward Glaeser of Harvard University and Professor Joseph Gyourko of Wharton Business school make this argument. It is this tight regulation of land markets, often in a country’s most productive places, that leads labour to locate in places where wages and prices are lower.
NIMBYism and stringent restrictions on building new housing holds back the economy, harms workers, and hampers social mobility
In turn reducing a country’s overall economic output in the process. In arguably the single most influential article ever published on housing regulation, Chang-Tai Hsieh and Enrico Moretti’s “Housing Constraints and Spatial Misallocation” determines such these restrictions that have held by the US economy by over 36% of Gross Domestic Product between 1964 and 2009.
The rise of the property-rights revolution that is “Not In My Back Yard” has reduced the construction of new homes tremendously. In particular where the economy has been strongest and most productive. This is not just an American phenomenon. In England we know the impact of supply constraints have a substantive impact on house prices. A fact we cannot choose to ignore.
The Social Mobility Commission released it’s “State of the nation 2021: Social mobility and the pandemic report” earlier this year in July 2021. It acknowledges that recent trends have shown wealthier families increasing levels of second home ownership and an apparent increase in intergenerational wealth transmission.
Its own findings highlight “as inheritance of these houses comes into play, we will see stark rises in inequalities”. The increasing sizes of inheritances received by those from wealthier backgrounds sets to limit the prospects of upward mobility for those from poorer backgrounds.
Labour needs to ask itself: does it care more about the preservation of housing wealth or the affordability of housing
As Michael Gove starts his new role as the Secretary of State for Levelling Up, Housing and Communities we must look back to his views on the matter. For example, he acknowledges in his 2013 Keith Joseph Memorial Lecture that “access to home ownership has become the preserve of those with family wealth”. In England, with reference to superstar cities like London, we know that two-thirds of house price versus rent increases between 1997 and 2018 can be explained by labour demand shocks and supply constraints.
A strong labour market is one a full employment and where employers must compete for workers. This makes an area more desirable to potential migrants and increases one’s willingness to pay for housing in an area. If the Labour Party is to be the party for labour, it must understand its role alongside supply constraints.
This means finding ways to allow labour to go to move to where the jobs are. We currently limit the number of workers who have access to such high productivity. But this is why we must build houses there to allow more workers to create wealth of their own.
Labour voters should care more about housing affordability than protecting housing wealth
Interestingly, Labour Party voters feature as an instrument in research methods to identify planning restrictiveness. On average, voters of the Labour Party have below-average incomes and housing wealth. Thus, it is expected that we should care less about the protection of housing wealth. Instead more about the affordability of housing.
Campaigners are fighting for planning reform to make housing more affordable
Sadly, in England we have seen the housing wealth preservers successfully lobby Government into submission. This has come much to the horror of campaigners for affordable house prices. Director of Priced Out, Anya Martin, said:
“We are horrified that Government is u-turning on planning reforms.”
“Renters have faced decades of rising costs because of our failure to build enough homes, and our planning system is at the heart of this failure.”
Priced Out finds itself alongside the National Federation of Builders. Who also have cried out they won’t forgive Conservative backbenchers for derailing the planning proposals. To note, smaller builders used to deliver 40% of homes during the 1980s, but now that figure is just 12%. This is in large part blamed on the current systems barriers to entry.
While some on the left deem the reforms a “ferocious attack on democracy”, they find themselves standing shoulder to shoulder with the wealth preservation lobby of some of the most affluent areas of the country.
Maidenhead, where the house price to earnings ratio is 12.7x, see its MP Theresa May having led the Tory revolt against planning reforms. Theresa Villiers MP for Chipping Barnet, where the household income needed to buy is £140,000, railed against the alleged reduction of democratic involvement in the planning system.
Both of whom see the ability to veto new homes in their local areas as the holy grail. Sadly, ignoring the fact local plans are politically led community consulted processes in themselves.
Labour needs to think about how they can win Tory safe seats like the Isle of Wight
Other Tory backbench MPs, such as Isle of Wight’s Bob Seely, have vociferously made the case against the “planning revolutionaries”. He represents an area with one of the worst levels of child poverty in the South East. Boasting below average incomes and weak productivity.
Average disposable household income on the Isle of Wight languishes below the UK average at £18,366 (-13% lower). The constituency has 2,149 households on its social housing waiting list. You would think with such demographics it would present itself as a target Labour seat for Keir Starmer.
Yet the Isle of Wight boasts a Tory majority of over 21,000 votes. Labour, being the party of tackling wealth inequality, needs to think about how people like Bob are effectively challenged. Last time Labour ever came close to winning Bob’s seat was in 1945. The year the Attlee government put housebuilding at the heart of its agenda.
Backbench Tory MPs block homes to preserve wealth off the backs of working people
The case of Bob Seely epitomizes how wealth preservers hamper housebuilding and damage equality of opportunity for his constituents. The wealth preservation lobby on the Isle of Wight are challenging the housing targets set for it by Government, with Bob Seely at the helm.
There are concerns about how the island will handle the additional 400 new homes per year. Most of which arising from the latest housing need calculation. This comes on top of the 640 calculated using the meagre standard method. Shockingly, the Isle of Wight has a price-to-earnings ratio of over 8x the average income. But this bears no relevance to the Tory preservation lobby, no doubt as they directly benefit.
Construction provides jobs, wages, and keeps income in the community. It improves the local economy as workers employed on each project have wages to pass onto other local businesses. The Isle of Wight is crying out for such opportunities. But those hell bent on preserving wealth continue to deny them the opportunity.
But the issue goes much further than the island itself. For example, the ONS states that those living in neighbouring Central Hampshire have an average annual disposal income of £26,302 (+24.6% higher than the UK average).
For those looking across the water for opportunities from the Isle of Wight the outlook is bleak. New Forest District Council, next to the Isle of Wight, is only delivering half as many homes as it needs. In effect pricing out poor islanders who may wish to move to this more productive part of the country.
Backing meaningful planning reform means creating more opportunities for workers. Only then will wealth become redistributed more evenly.
Changes to land use regulations can form part of the biggest redistribution of wealth under a Labour government
Historically, local economic booms matched with local building booms. Prior to 1946 building was lightly regulated and housing was allowed to be built in areas of high demand. For example, there were 80,000 new build homes created in London in a single year of 1930 alone. Over 2.5x the net number of new homes delivered in 2017/18. A year that marked a decade long high, mostly by the private sector subsidised by government.
We know extensive restrictions on land use and building leads to higher house prices, rather than more homes and workers. If Labour is to be once again the party of the worker, it must deliver more homes. People used to move from poor places to richer places. However, due to restrictive land use regulations this pattern is on the decline.
We must allow the population to seek work in wealthier places. These are places where demand is strong and productivity is high. In doing so we will avoid unequal mobility and poverty traps created by a lack of new housing.
We must counter the NIMBY property-rights revolution to improve prosperity for all – and say ‘Yes In My Back Yard’
For constituencies like Bob’s to prosper, we must tackle the misallocation of labour. This means allowing workers to cross the Solent to the New Forest West and building more homes. While wealth inequality starts at home, it ends with allowing others to access creating that wealth of their own.
Thus, Labour needs to present the country with a vision for prosperity. It must do this by challenging the NIMBY property-rights revolution. One steeped in a world of draconian regulation, high prices, and ever more entrenching wealth inequality. In allowing more families to build wealth through the property owning democracy, it can create one that will become less unequal.
Labour must focus on improving opportunities for the workforce through land regulation. By redistributing wealth more fairly through building more homes in high demand areas it can achieve this. After all we know that data on wages shows big cities do bring prosperity to their wider areas.
By moving to “Yes In My Back Yard” (YIMBY) Labour can tackle wealth inequality and become once again the party of aspiration. Equipped with this vision it will can attract soft Tory voters, while at the same time putting labour back at the core of its policy-making.
Christopher Worrall
Chris is the Editor of Red Brick blog and sits on the Labour Housing Group Executive Committee.
He currently is Chair of Poplar and Limehouse CLP, co-hosts the Priced Out podcast and is the Local Government and Housing Member Policy group lead for the Fabian Society.
In a way, it was almost inevitable that I would develop an interest in gentrification and housing. After all, I am a millennial and I grew up in Zone 2/3 of Inner London. I didn’t just watch my neighbourhood change as I grew up, I watched the door to a future my parents’ generation took for granted close before my eyes.
My parents moved to Forest Hill, South East London in the mid-80s. Even back then my parents couldn’t afford to live in Hackney or Tooting (my mum had been a big Citizen Smith fan). Growing up, South London was the butt of jokes – most of which revolved around it being poorly connected, scary or dull. But by the noughties, my area would start appearing in the aspirational columns about London’s new exciting suburbs. Housing prices rose sharply and continuously. The global housing market crash in 2008 couldn’t stop this runaway train and the last decade has seen my neighbourhood transform.
I noticed the most rapid changes taking place after 2011, when the London Overground was delivered to the area. I was away at university over this period and as I returned each summer, there were new cafes, estate agents and pizza places to replace the launderettes, sandwich shops and second-hand electronic stores. I remember chatting to the owner of Cafe No 41 on Brockley Rise around this period. He had owned Bertie Rooster’s Fried Chicken on the same site and he said he’d noticed the area changing, so he thought he’d better change too. Smart move.
Local NIMBYs, true to form, opposed the transformative rail connections. I remember my dad, who worked in transport, railing against the local opposition to it. He had been arguing for greater capacity for the Overground, for longer trains, and an additional station between Surrey Quays and Queen’s Road Peckham. As the Overground now sits at bursting point — a victim of its own success — he should’ve been listened to. Ironically, the Overgound has been a huge boon to their property-owning NIMBYs that opposed it.
But while I infamously remain sniffy towards NIMBYism, I do understand it. A rapidly changing neighbourhood can be discombobulating and disconcerting. As a strange teenager, I remember pleading with my friends to go to the array of cornershops in Honor Oak instead of the new Sainsbury’s Local if they were buying drinks and snacks before we had a kickabout in the park. Instinctively, I didn’t like what I saw as the homogenisation of my local mini-high street and I knew that Sainsbury’s would destroy some of those independent shops (it did) that I felt I had a relationship with. My instincts were to, in a way, keep my neighbourhood ‘static’.
I’ve been on a journey to try and understand the phenomenon that shaped my home town when growing up and understand my own feelings around it. While at university, I wrote my dissertation on the changing Toxteth and Canning areas of Liverpool. I had grand ambitions to start a university society that would work with the local community to improve ‘Town & Gown’ relationships in the nearby area. Like most of my plans, they crumbled due to a bad attitude and lack of endeavour. The dream ended with me getting into a fight at a Residents’ Association’s ‘cheese & wine’ night and quite literally being thrown out.
However, looking back on the experience, it gave me a good understanding of how gentrification works and was a valuable insight into a world I would later inhabit. Gentrification is an organic process and one seen in major cities around the capitalist world. The cliched but illustrative example is as follows – artists move into an area due to cheap rents and large spaces. They create an artistic community and the area becomes ‘cool’. With it being cool, it then becomes desirable. The greater appetite for the housing then pushes up rents and prices and gradually the area’s demographics shift.
It was once thought that cities would act like a pebble falling into a pond, rippling outwards and decaying inside. Yet from the 1970s onwards the shift has been back into the centre. Some hippies and squatters now own multimillion pound property in areas of our West End. Savvy boomers profited.
The process of gentrification can be sped by developers who see the opportunities offered by a rent-gap to maximise profits. In this, developers are simply capitalising on a saturated housing market and building where demand is. Likewise, ‘gentrifying’ businesses are responding to their new clientele not moulding customers from thin-air and wishes. Cereal cafes and posh chicken shops are a symptom of gentrification, not a cause. Today, many of the anti-gentrification activists I come across are ‘first wave’ gentrifiers themselves, similar if not a bit older than my parents.
While it is an organic process, gentrification does cause profound issues. Sharp rises in the cost-of-living create havoc for low-income families and at its starkest, drives them from their neighbourhood. As I mentioned in my last blog, social homes with secure and affordable rent is a fire-wall against gentrification. But London is increasingly being hollowed out, swathes of North & West London in zone 1 & 2 have become binary and soulless places – the very well-heeled live alongside enclaves of council homes occupying parallel lives. I worry that the evaporation of London’s Little Italy, will eventually happen to our Little Bengal and our Little Portugal.
***
My blood still curdles at a previous generation of local politicians who seemed to actively encourage the gentrification of their neighbourhoods, as a means of improving their patch. Gentrification doesn’t solve poverty, it just kicks it down the road. But for some local politicians, that once seemed enough. Angered by what I saw, I vowed to campaign against it. It signalled my first forays into local politics.
In my last blog, I wrote about Lewisham’s Residents Charter and how we’ve come along way from this era. Like our predecessors, we know that mixed communities are positive for social cohesion and shared uplift. Likewise, we also know that many of our large post-war estates are in need of urgent renewal. However, as an administration led by a new wave of politicians, we’re committed to ensuring that any regeneration produces a net gain in social homes, expanding our gentrification fire-wall in the borough.
Yet I do not remain hopeful for the future. Writing this, I am struck by just how long I was part of the problem and what that says for the future. I was driven into local politics by the anger that while my neighbourhood was being torn up and built back up, none of these homes were for me.
Developers, greedily lining their own pockets, were building ‘luxury flats’. Councils were failing to stand up to them and accepting schemes with pitiful amounts of affordable housing.
It’s been through sitting planning committee as a councillor that I learnt that most of these flats weren’t ‘luxury’. The only thing luxury about them was the unaffordable price. The housing crisis has simply become so insane in London that any market-value home is deemed luxury and therefore out of reach of someone like me — a young person without assets, earning the average London wage.
This situation has bred a culture of cynicism among an entire generation. As we discuss rents at house parties and scoff in frustration at the mere idea of saving for a deposit, we’ve grown suspicious of new housing and growth. Moreover, the council-led schemes of the past have led to a sour taste in people’s mouths. While these schemes, directly reducing social housing, could be an example of top-down gentrification — it would be wrong to view gentrification as a whole, as planted from top-down from developers.
If writing to note to my younger self, I’d be rather pithy. ‘Dear Leo, sick of chain stores and the champagne et fromages under those new flats? Let many, many, more flats just like that be built, so rents and prices round here come down and the demographics that fed those independent shops and the sandwich shop you loved so much, can remain.’ As this article highlights, the forces that drive gentrification ‘do not come from the construction of specific apartment buildings or retail complexes, no matter how many granite countertops or artisanal coffee shops they might contain.’ Increasing supply will lower prices.
***
It is only now that I see how damaging the framing of gentrification as a top-down process, thrusted-upon benign communities by developers, has been.
As a councillor, I have been shocked by the glacial and bureaucratic process of approving new homes in the borough. Not only that, I’ve seen how small interest groups have leant on councillors to reject new homes on spurious grounds.
But this is only the tip of the iceberg. As this Centre for Cities report highlights, our planning system operates like the old Eastern Bloc, rationing supply through a permit system. ‘In both the former Eastern Bloc and the English housebuilding market, firms must apply to planners for a permit, or a planning permission, to get the inputs they need to do business.’
We currently have a system that cannot respond to demand. Developers need to go through the process of receiving planning permission which is slow, often costly and fundamentally uncertain (planners can downsize or councillors can strike down an application, years into the process). This means ‘the amount of land that they can develop tomorrow is fundamentally unknown.’
It is this risk, inherent in our system, that means developers hoard land that has planning permission (or is likely to receive planning permission). As Centre for Cities notes, ‘this ‘hamster-like’ behaviour is rational as it means they will always have land on which those assets can be operating, even if planning permissions temporarily dry up.’ The report also notes:
‘A site that has planning permission or is suspected to have a high chance of receiving planning permission can greatly increase this price, especially near cities and large towns with successful economies and expensive housing’. To illustrative this point, in 2010, agricultural land without planning permission around Cambridge was worth roughly £18,500 per hectare. Once it received planning permission for housing, the value per hectare increased to £2.9m.
Developers must cover these high land costs, and they cannot escape them by increasing production or efficiency as the planning system rations the supply of land they require. They therefore need to pass their land costs onto consumers and sell new houses at high prices.
Developers experience a disadvantage trying to acquire land which can be lawfully developed, they enjoy the advantage of a sellers’ market when selling new properties to consumers due to slow buildout rates. This means that predominantly only big powerful developers can get hold of land which will get large-scale planning permission, and once they have hold it, they can build a slow ‘absorption rate’ keeping house prices high due.
If developers could instead just buy land and develop it without applying for a planning permission, then “planning gain” and thereby the absorption rate would both disappear. The price of land would reflect local demand and, as firms would and could only buy what they immediately needed, they would be forced to build new housing as quickly as possible to outcompete rival firms that could now do the same.
It is our system which creates the circumstances for large developers to be able to buy the rationed land for development and build slowly as they face little competition.
But this isn’t a cry to rip-up the rule book. Local planning frameworks should remain in place and offer clear rules of what can be built and where. However, areas zoned for development should be greatly expanded. As the campaign group Priced Out argues:
‘For the areas that are zoned for development, there should be transparent rules about what cannot be built there — which could include what the developments are used for, and rules on look and feel — with everything that does not contravene these rules allowed. Alongside this we already have extensive national building regulations, rules on the sustainability of developments, and various other regulation which is already in place.’
Priced Out Manifesto | Rules-Based Planning
However, when reaching out to colleagues to express these views and concerns, I receive immediate and blanket push-back. Those I speak to see the bureaucracy of our planning system as a bulwark against lowering standards. They instinctively reject ideas about cutting red tape and increasing competition to raise standards. Developers are the bad guys that need to reined in by councillors, rather than firms rationally gaming a broken system that we uphold.
It has become fashionable across the political spectrum to deny that our housing crisis is linked to a lack of supply. Campaigners against new market-sale homes often point to the fact that the UK has 216,000 long-term vacant homes, which could occupy a sizeable chunk of our 280,000 homeless people, if only they were happy to be bussed to Cornwall or Cleethorpes.
However, rather than suggesting that we do not need to increase supply, our empty homes highlight our nation’s stark housing shortage. In the UK, only 0.9% of homes are long term vacant. In a healthy market, surpluses provide ‘a strategic reserve which they can use to respond to sudden changes in consumer demand.’
Compare our situation to Japan, a nation with an affordable housing market. In Japan, less than 5% of homes are socially rented (here it is around 17%). Across Japan, 5.6% of homes are long-term vacant, while Tokyo the figure is 2.5% – which is a higher share of empty home than in Burnley – other most affordable city in England and the one with the most vacant housing. Suppressing vacancy rates in the UK will only make the situation worse. Instead, we need to build enough to homes to create a healthy surplus.
As I have written previously, the housing crisis cannot be tackled by local authorities building themselves. This blog succinctly nails the issue: The UK’s housing affordability crisis is too little supply, which cannot respond to prices. However, getting Labour Party colleagues and angry young millennials alike to accept that we need developments of market-rate properties on a huge scale in areas of the country where our housing shortage is most acute — will be an uphill battle.
Steam-rolling through reforms won’t work. Instead, we need to start that process of chipping away – gradually building a coalition in support for house building. And maybe one day we can get more people to say yes-in-their-backyard to luxury flats.
Leo Gibbons-Plowright
Leo is a Labour and Co-Op Party Councillor for Forest Hill in Lewisham.
