Neil O’Brien is MP for Harborough.
To many Conservative voters, we seem to have built a lot of houses in recent years. Yet much new development seems poor. And young people still can’t afford to buy a house. What’s going on?
The last fortnight saw the publication of Roger Scruton’s final report – a Government Commission on “Building Better, Building Beautiful”. It tries to answer some of these questions.
There’s much in it I agree with. But if we’re really going to “build better” and solve the housing crisis we need massive changes. We need:
A clearer vision of where we want development – with more in cities.
At present, councils have to build enough to meet their “Objectively Assessed Need” (OAN). In practice this means meeting forecast population growth. But the forecast just reflects recent trends.
Instead of saying that the future should reflect past trends, there are strong arguments for preferring more development within cities: it means more walking, less congestion, less pollution and lower energy use.
And as Create Streets has shown, denser cities are not about grim tower blocks. The densest places in Britain (Kensington) and Europe (Barcelona) are nice places to live, dominated by tall terraced houses and low-rise apartments. Paris is twice as dense as New York.
Britain has the least dense cities in Europe. And also cities which have grown very little. Places like Dundee, Glasgow, Liverpool, Sunderland, Birkenhead, Hull and Newcastle all had smaller populations in 2017 than 1981. Let’s choose more regeneration of cities and less sprawl. Let’s change OAN to target building more in cities.
A clear vision of what kind of development we want – with less piecemeal development.
Even if more development happens within cities, there will still be some in suburbs and shires. Do we want more piecemeal, infill-type development, or a smaller number of larger, properly planned developments? Should we stick more estates on the edges of all our villages, or build a stand-alone garden village, or a town extension?
At the moment, we have mainly piecemeal infill. Developers prefer it, as it’s far more profitable. You don’t have to pay for new schools or GPs surgeries, or new roads, or any expensive “place making”. Instead, you can piggy-back off existing facilities.
But infill is the type of development that attracts most opposition. That’s unsurprising: it means building right next to people. And specifically, to people who chose to live on the edge to get a nice view.
There are also physical limits to how much piecemeal development you can have and still have a nice place. Roads through the centre of a village (often not built for cars) become impossibly congested. Even if you had money, there’s no space to expand the village school, because it’s surrounded by houses.
With larger strategic developments, you aren’t building next to as many existing residents. You can plan for the infrastructure properly, get land for that new school. Build a new main road that doesn’t have people living on it, and so on. Let’s give councils the tools to have genuinely planned development, not a free-for-all. First of all that means…
A better system for making development pay its own way.
Part of the opposition to new housing comes from the fact that too often it comes without the infrastructure required.
So your road and the local school and GP’s surgery get overcrowded. People see developers making huge profits while infrastructure is either not provided at all, or the cost is dumped onto the taxpayer.
Section 106, the main way councils secure contributions from developers, is utterly dysfunctional.
Councils cannot use it to fund recurrent expenditure. They cannot use it to fund anything to meet existing needs in the community, only new needs created by the development. Contributions are tied to a very specific purpose. If what people want has changed five or ten years later, tough luck. Because collection is confusingly fragmented between fire, police, health, county and district councils, sometimes developers get away without paying.
There were tight limits on pooling multiple payments which have been recently eased. But payments are still time-limited, and developers can hold off payments by keeping construction below certain trigger thresholds. So if a developer can hold off paying, the opportunity to secure a site for a new village hall may pass. Or, if there are only enough developments in a given time to pay for half a school, then plans to build up funds may get timed out, meaning developers avoid paying.
For all these reasons, huge sums are returned to developers. In 2014, the BBC found that councils alone had returned £1.5 billion of community funds back to developers. We need to either take off all restrictions on Section 106, or replace it altogether.
Give councils the other tools they need to improve development.
In my constituency, there’s derelict land on the site of an old factory. It’s two minute’s walk from the railway station, which is just an hour’s journey from London. The council first granted planning permission in 2004. But nothing has happened, and the owners currently lose nothing from sitting on their hands.
We need to learn from Europe and the USA. Give councils borrowing power to buy land and grant themselves planning permission. At the moment that’s a legal minefield for them. We should reform the 1961 Land Compensation Act to clarify that local and central government can purchase land at current market use values. We should stop land prices from being inflated by the expectation that developers will get away without paying for infrastructure. We should make Homes England into a sort of Flying Squad to help councils plan and deliver brownfield regeneration. And make sure local planning departments can raise money through developer fees to hire and retain good staff.
Use the tax system to boost home ownership.
Home ownership here is fourth lowest in Europe. While increasing the supply of new homes relative to population growth improves affordability, it does so only in the long term.
France built twice as many homes as Britain since 1970 and real house prices increased half as much there. But in the short term, the effect of more building on house prices is almost zilch, because new supply is so tiny compared to the existing stock.
The only way – and I mean the only way – that we can get home ownership up by the next election is by changing the balance between rented and owner-occupied housing.
From 2002 to 2015 we saw a relentless collapse in home ownership (from 71 per cent to 63 per cent) as the growth of buy-to-let outstripped new supply.
In 2015, we started phasing in limited changes to the tax treatment of buy to let and second homes. It worked. The collapse stopped. Ownership has even ticked up slightly, to 64 per cent. But that’s still low. Ten countries in Europe are over 80 per cent.
We don’t need to, and shouldn’t, change things for existing landlords who have invested on the basis of the current rules. But we must use the tax system to encourage new investments to flow into companies, not into inflating house prices. To favour owning over renting.
We either do this, or we will fail to increase ownership, and we’ll drive young people into the arms of the Corbynistas. Simple as that.