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Changing course – housing policy and planning reforms

Government reforms are likely to increase housing supply in England.

Last week, the Government announced important reforms to the housing planning system as part of its drive to improve UK productivity. The reforms include a significant departure from previous doctrines of localism and ‘development control’. The experience of other countries suggests these changes will be important steps towards improving the supply of housing in the England.

The performance of the English land and housing market in recent decades has been defined by increasing imbalances between demand and supply, which have led to sharp rises in rents and prices, causing arbitrary redistribution of wealth, and damaging living standards, especially for the poor. Research we published last year identified three aspects of the governance of land in England that have contributed to this performance:
  • planning confined to the local level
  • funding of local public services and infrastructure poorly responsive to housing development
  • a mindset of ‘development control’ – the requirement that any change in land use be subject to individual planning permission.
The resulting system has an in-built bias in favour of homeowners and is to the detriment of renters and prospective house buyers. These biases have been compounded by shifts in public attitudes towards housing over the last three decades which have meant that a large part of the electorate has come to see increasing house prices not as a problem but as an opportunity. This has led to pressure on government to make it easier for people to get onto the ‘housing ladder’ by taking action on demand, rather than tackling the problem of housing supply which might dampen the increase in house prices. Close ties between the housing market and macroeconomic performance have also made politicians reluctant to intervene. There are finally some encouraging signs that a change of approach might be on the way. Last week’s initiatives were designed to streamline and speed up local planning processes; intervene in those local authorities that fail to produce a timely plan to accommodate future housing need; strengthen co-operation between local authorities; use development corporations to deliver higher-density development in commuter transport hubs; give new planning powers to mayors and combined authorities; and create a ‘zonal system’ for statutory registers of brownfield land, which will be granted automatic planning permission. Taken together, these reforms represent a significant departure from pure localism and development control, and should shift the balance toward boosting supply. There have also been encouraging signs from some authorities in London where problems of housing affordability are most acute. For example, in June, the City of London Corporation announced plans to embark on a major housebuilding programme, which should see its stock of housing increase by a third, adding to new homes to the Corporation’s existing housing estates in Southwark, Tower Hamlets, and Lambeth. Kensington and Chelsea also revealed plans to build new homes in its existing council estates, which could include demolishing existing homes and building new ones at higher density. But policy in this area is not totally coherent. At the same time as launching a package to boost housebuilding, the Government is pushing ahead with its manifesto commitment to extend the ‘right to buy’ in England to tenants of housing association. LAs will be required to sell their most expensive properties as they become vacant and compensate housing associations for selling their assets at a discount. This is likely to harm their willingness and ability to build more houses in the future. The financial health of social landlords could be further compromised by the cut in social housing rents announced in the Budget (1% a year for four years; a 12% reduction in average rents by 2020-21) reversing a commitment the Coalition made last year to rent increases for the next decade based on the rise in the Consumer Price Index. The Office for Budget Responsibility said these changes may result in 14,000 fewer new homes being built by housing associations by 2020. We noted in our report that survey evidence indicates there might be a shift in in public attitudes to house building, perhaps prompted by problems of housing affordability affecting an increasing number of people, and by a decline in home ownership. We suggested that shift could act as a catalyst for policy changes. Last week’s moves suggest that the government might now be responding.
Cameron government
Institute for Government

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