We need to reform the 1961 Act to create places people love

We need to reform the 1961 Act to create places people love

Guest Blog – Will Tanner, Director of Onward

If you were to construct a system to maximise resentment towards new housebuilding, the British land system would probably come close.

For decades, new homes have been encouraged in places that communities are most likely to oppose development, in designs that jar with local styles, without proper consultation with communities, and with insufficient investment in the infrastructure that local people understandably expect alongside housing.

The root causes of undersupply are often thought of as ideological – NIMBYism or a lack of political courage to reform Britain’s planning controls. But in many cases opposition is often practical, based on where, how, and what we have tended to build, and whether value from development accrues to the community or developers and landowners.

Polling suggests that 62 per cent of people support building more housing in their local area, against 30 per cent who are opposed, and when asked which arguments against building more local housing they find most persuasive, people cite increased demand for local services, more traffic, and environmental damage. Turning NIMBYs into YIMBYs depends on alleviating these concerns.[1]

We therefore need a new model that is practical and non-adversarial. A proposal put forward by Onward last year would refocus the plan-making process away from passive and sequential development – where landowners choose which land to bring forward, usually on the edge of existing settlements – towards an active policy that allows local authorities to choose where housing is most deliverable and acceptable to local residents.

This kind of master-planning, common in Europe, would likely favour standalone settlements over piecemeal development, and allow for schools, roads and doctors surgeries to be pre-installed – not ignored. This would return to the roots of the New Towns programme and Docklands Development Corporations in the second half of the 20th century, since which we have failed to build any significant planned communities.  

Most importantly, an active approach to place-making could fund the schools, doctors’ surgeries and roads that communities so desperately want – through land value capture. At present, 75% of land value accrues to developers and landowners, or around £10 billion a year. The experience of other countries shows this is the wrong way around: the Netherlands manages to capture around 90% of land uplift gains for infrastructure in some cases.

Achieving this kind of change will require ministers to be bold and reform ‘hope value’ – the imagined value of the land if it had planning permission – by removing it from the 1961 Land Compensation Act and allowing local authorities to buy land at real market rates.  ‘Hope value’ is the principal reason the cost of land has risen twice as fast in Britain as in France in the last 45 years,[2] and one reason why land for new towns is often prohibitively expensive or too complex to be viable. 

There is no doubt that this would be a radical change, but it is not the slide into state control that some fear. It is what happens in the Netherlands, for example, where local authorities have a right to carry out a compulsory purchase order (CPO) on the land if a landowner does not release land needed for the fulfilment of a local land plan. In practice, CPO does not actually have to be regularly used in practice, because local authorities have strong, clear powers, meaning landowners tend to strike voluntary agreements that better reflect true market values.

This kind of place-making approach would allow for more of the uplift to be spent on things that people care about, like schools, GP surgeries and roads. And in doing so, Britain would generate far more homes. It is no coincidence that, between 1970 and 2015, Britain built half as many homes as France, which employs an active model of development, despite having a similar population and long-run growth rate. That is equivalent to 7.8 million fewer homes or every home in Greater London, Scotland and Wales put together.

The problem with development is not that we have too much or even that we have too little – although at just 222,000 a year, Britain clearly does build too few homes. It is that our housing and planning system encourages new build houses when it should be incentivising newly planned places – complete with infrastructure paid for by land value uplift and supported by communities who have been consulted.  

There is no silver bullet to the housing problem but getting local people to support local homes is a good place to start.

[1] See https://capx.co/believe-it-or-not-britain-isnt-a-nation-of-nimbys/

[2] OECD, Total housing stock in OECD and EU countries, Table HM1.1.1b, and Michael Oxley and Jaqueline Smith, 1996, Housing Policy and Rented Housing in Europe.