“The galling truth is that the big, powerful developers which hoover up most new planning permissions have long staged a deliberate go-slow, making higher profits overall by producing fewer homes so prices keep rising. Unless ministers acknowledge and tackle this massive market failure, our chronic housing shortage will remain – with all the social and political fallout that entails.”
[And this is from the “Torygraph”! – Owl]
Liam Halligan 29 August 2020 www.telegraph.co.uk
‘We need more new housing,” as Boris Johnson has argued, “to correct this generational injustice that young people often can’t buy a home, as their parents did”. Yet the Government’s “radical planning system shake-up”, unveiled earlier this month, is inadequate and misses the point.
Britain has built around three million too few homes over the last three decades. That’s why property prices have spiralled, with today’s young adults spending a higher share of their income on rent, and less likely to be owner-occupiers, than at any time since the Thirties.
Across much of the country, even professional youngsters are often “priced-out” – with the average home costing eight times average annual earnings, compared to four times during the Nineties.
The share of 25-34-year-old owner-occupiers has since plunged from 67pc to 38pc, with well over half a generation denied property ownership at this crucial family-forming age. And lower down the income scale, an endemic shortage of social housing has driven a rise in overcrowding and homelessness.
Britain’s often tortuous “case-by-case” planning system certainly needs reform. That means more “zoning”, with clear and predictable residential building rules – which, to some extent, is what this new white paper proposes.
The fundamental problem isn’t, though, as the Government suggests, “a lack of land with planning permissions” – for around 80pc of residential planning applications made are already being approved. The real issue is the ever-lengthening delays between permissions being granted and houses actually being built.
The galling truth is that the big, powerful developers which hoover up most new planning permissions have long staged a deliberate go-slow, making higher profits overall by producing fewer homes so prices keep rising. Unless ministers acknowledge and tackle this massive market failure, our chronic housing shortage will remain – with all the social and political fallout that entails.
Between 2010 and 2015, an earlier planning shake-up saw the number of permissions granted each year increase by 75pc. But the number of homes completed annually was just 33pc up. Similarly, between 2015 and 2017, as permissions granted per annum increased 36pc, homes built rose just 15pc. The growing delay in build-out rates is significant and undeniable.
Evidence I submitted to a recent Parliamentary inquiry demonstrated that between 2010 and 2017, of 1,943,125 new permissions granted in England, some 932,335 – almost half – remained unbuilt. Over a seven-year period, then, during which the UK’s housing shortage became chronic and unaffordability spiralled, our housebuilders applied for and were granted clearance to construct almost one million new homes they chose not to build.
Back in 2008, countless small and medium-sized firms which convert permissions into marketable homes relatively quickly, to aid cash flow – built over two-thirds of all new homes. Many were then wiped out by the financial crisis and lots more have since been stymied by an inability to raise finance to access building land.
That’s why the housebuilding industry is now far more concentrated, with the top ten developers accounting for around 70pc of new supply. These over-dominant players use their well-resourced legal departments to obtain planning permissions, some of which provide a legitimate “building pipeline”, but many of which they won’t use. Such permissions still bolster their balance sheet, boosting share prices and related executive bonuses. And once “captured”, they aren’t available for smaller firms.
So the big boys control the rate at which homes come to market in certain localities, boosting profit margins way higher than they should be, while keeping smaller rivals at bay. And that’s why our housing market is “broken” – because the industry is largely controlled by a few large players deliberately restricting supply.
A 2016 House of Lords investigation concluded the UK housebuilding industry “has all the characteristics of an oligopoly”. A full Competition and Markets Authority inquiry into an industry imposing “contrived scarcity” on homebuyers, limiting the number of new homes to artificially boost profits, is long overdue.
But even bolder measures are needed. In my book Home Truths, I propose that if a home isn’t completed, ready for sale, within two years of permission granted, developers should pay full council tax on unfinished properties, rising to double then triple council tax in subsequent years.
Planning permission should be a contract to build, between developers and the community, not an option to build if developers feel like it. Altering financial incentives would address the worst excesses of deliberately slow build-out.
We need to free-up parts of the greenbelt – much of which is urban scrub. Far from being “concreted over”, it has doubled in size since the Seventies – and now covers 13pc of England’s land mass while housing, including gardens, accounts for little more than 1pc. This white paper flunks that challenge too, preserving all greenbelt land.
We must recognise, also, that “zonal” planning in some areas won’t much help smaller builders, or tackle unaffordability, when land prices, driven by speculation, remain sky high. When agricultural land is granted planning permission, its value can jump an astonishing 200-fold or more.
But the right to land ownership should not include the right to capture almost the entire value uplift when planning permission is granted – given that the uplift reflects state spending on local infrastructure and the efforts of local businesses to create amenities.
Uplift should be split 50-50 between landowners and local authorities. That would rein-in speculative pressure by making it less attractive to sit on land as prices rise, bringing more acreage to market. Plus, it would raise serious cash to provide schools, hospitals and other local public services, revolutionising the fraught local politics of planning.
“Solving our housing problem … requires confrontation with vested interests,” observed the late Roger Scruton last year, in one of his final interviews. “And an awful lot of those vested interests are, it has to be said, connected to the Conservative Party”.
Has Johnson got the intellectual grit and political determination to inject some genuine competition into our moribund housebuilding industry? Will he fight for capitalism or protect “crony capitalism” instead?