Nicholas Boys Smith is the Director of Create Streets
What changes should Simon Clarke, the new Secretary of State at the Department of Levelling Up, make? What will increase home building and support local (and hence national) growth and productivity without crashing straight into the face of what local people and their representatives will tolerate?
I have spent the last eight years of my life at Create Streets trying to improve the quantity and popularity of the homes and places we create, not just by research and by advocating policy change, but also by working on the ground with many dozens of neighbourhood groups, parishes, councils, and developers, master-planning in the UK and abroad, and from Cumbria to Cornwall.
Here are three things I have learnt and three ideas for new homes and better places based on what we’ve found works. The good news is: I think we’re starting to find a way through.
First, the ultimate political problem is that people support housing in principle, but not in practice. Reform is still necessary. The standard expectation of most British people is that new development will make existing places worse. Nor do they trust the process. Only two percent trust developers and only seven percent trust public sector planners with large developments. Sophisticated pricing analysis of revealed preferences shows why this is deeply rational with historic places normally imputing more value than new homes and developments. Until we turn this around then it will be very difficult politically to ‘win’ the battle on housing supply.
Our planning and development system creates, slowly and at huge expense, bad places which are objectively less popular than those we created in the past. Most historic neighbourhoods and homes are consistently worth more than new neighbourhoods and homes even when you adjust for other factors. A study of every property sale in six British cities found a premium associated with older neighbourhoods up to seven times greater than the premium for new build homes.
Nor does it create enough of them, with catastrophic consequences for standards of living and generational inequality. The ratio of average UK house prices to average incomes has doubled since 1998. This means that Britain’s housing challenges are not just retarding the age of home ownership. They are fundamentally changing generational fairness. We just don’t have enough homes in the right places. Nationally our ratio of homes to households (0.99) is one of the tightest in Europe (average: 1.12). Nor does this reflect suppressed household formation due to high prices. We probably need at least a million more homes. A smaller proportion of people born between 1981 and 2000 are homeowners, at this life stage, than for any previous generation since 1926. As the post-war politician, Iain Macleod, put it: “You cannot ask men to stand on their own two feet if you give them no ground to stand on.”
Secondly, there is a smoking gun and it is about regulatory certainty as much as de-regulation. Since 1947, the right to develop in the UK has been nationalised. But the implementation of that nationalised planning right is profoundly unpredictable. A new building in England needs planning permission; a case-by-case judgement by a planning officer. This judgement is based on the local plan which is a policy document, not a regulatory one. It gives principles and guidance. It doesn’t set rules. Knowing what you can build, “winning” permission (a telling phrase) takes time, judgement, experience — and money.
This is fundamentally different to most other countries where the right to develop is not nationalised but regulated. In countries as diverse as America, France and Germany, as long as landowners follow the local regulations, the difficulty, complexity, and cost of achieving development is very modest compared to the UK.
In Germany, for example, the freedom to build is a part of the constitutionally-guaranteed definition of property. It is not granted to the property owner by the law. It is innate. Bottom-up not top down. Since 1947, the opposite has been true in Britain. The right to develop property is granted by the state. It does not come with the land. Even exceptions (so-called “permitted development”) are just that: exceptions carved out by legislation from the universal need for individually negotiated case-by-case permission.
As a way of regulating an entire section of the economy our approach is inadequate. All standard frameworks of good regulation suggest that regulation should be predictable, certain, not subject to producer capture or to “who you know.” When this is not the case then markets become “hard to enter” and are unduly influenced by an oligopoly of large firms and producer, not consumer, interests.
This is what has happened in England. Greater uncertainty and a slow process with major expenses up-front, before the right to build is certain has increased planning risk, enormously pushed up land prices with permission to build, and acted as a major barrier to entry for small developers, minor landowners, self and custom builders, and innovators generally.
Thirdly, with nationalised planning but unclear regulatory asks, it’s all about de-risking so that local housebuilders, SMEs, and self-builders can create more new homes in ways local people will support. Far more people commission their own homes directly in most other countries. You can literally order them from a catalogue or engage a small local builder. That’s just not feasible in this country. Only the big boys can negotiate all the cost and risk. Our self-build market is miniscule. And small British firms build fewer new buildings proportionally than any other European country — and still falling. 30 years ago, small builders built 40 per cent of new homes. Today it is 12 per cent.
This lack of choice leads to too many poor homes and not enough of them. Developers sell at the speed “the current market” will bear. Unlike the rest of the world, there is no meaningful competition from small builders or self-commissioned homes to meet demand and constrain prices. Hence those slow build out rates and the vicious circle of high costs, constrained competition, constrained supply, high prices and bad places.
Here are three practical, deliverable suggestions to create what I term ‘fast tracks for beauty’ to create more homes and better places. They either do not require legislation or can be part of the Levelling and Regeneration Bill.
First suggestion: do keep the important “Street votes” clause 96 within the Levelling Up and Regeneration Bill. Ensure it does not include case-by-case planner’s discretion. Street and block votes are an idea worked up by London YIMBY, Policy Exchange and my colleagues at Create Streets to give individual suburban streets the right to permit intensification where they judge it worthwhile, while sharing the uplift in value with the rest of the community. By giving locals control of height and massing, within nationally regulated limits tied to popular norms in the area, it would allow them to weigh up the benefits of extra floorspace—personal or financial—and judge if they are worth the disturbance. It’s a pilot with no down-side (the worst that happens is nothing) and which just might be profound in unlocking more local support for new housing by realigning costs and benefits.
Second suggestion: introduce mansard extensions, a simple and uncontroversial tweak to the National Planning Policy Framework to allow harmonious mansard extensions. Georgian and Victorian homeowners tended to add harmonious mansard storeys to their homes when space became scarce. This practice was largely prohibited by the planning system in the twentieth century. Create Streets’ report Living Tradition showed how to make this happen more often. We’ve got detailed exact wording which we’ve drafted up at Create Streets with a planning QC and will be publishing imminently. This could yield 120,000 new maisonettes and another 230,000 bedrooms in areas where living space is most scarce. No legislation is required. It would also reinforce excellent ‘gentle density’ urbanism and stimulate the development of traditional building skills.
Third suggestion: encourage and fund parishes and town councils to pilot the use of existing mechanisms to support more so-called infill development and provide a fast track to lots of mini-investment zones. The Localism Act 2011 created two mechanisms that councils, parishes and Neighbourhood forums can use to pre-approve certainly types of planning permission within a larger area once they have been consulted on locally. They are called Local Development Orders (LDOs) and Neighbourhood Development Orders (NDOs). Such orders could provide the welcome certainty of ‘investment zones’ without any required legislation, thus really helping SMEs, self-build and local housebuilders. Thanks to the excellent work of Cornwall Council and the Duchy of Cornwall they are now being used on the Nansledan urban extension of Newquay.
However, they have otherwise been very little used. This would appear to be as councils have not wished to cede the power of the planning permission process or don’t even know they exist. This approach may be particularly important in so-called infill sites within existing towns. Particularly in lower value areas, the upfront cost and risk typically knocks out development.
It would be worth investigating in more detail why these have not been more used and considering ways to encourage local councils to make more use of them. One option would be to pay for pilots and make templates for infill housing very readily available to councils on free download. A pre-approved pattern book or building and house types could de-risk many thousands of sites and could be supported by the newly formed Office for Place (disclaimer, I chair its advisor board). Create Streets is currently running a project, creating Neighbourhood Development Orders for several hundred infill sites which will be embedded (and thus pre-approved) within the forthcoming neighbourhood plan. It will only be possible if we can demonstrate as part of the Neighbourhood Plan that they are locally supported.
These suggestions would make it easier to create more homes and to do so with less requirement for new roads and tarmac. More homes. More hands to make those homes. That must be worth trying?