Britain’s government may be about to waste its best chance of success

THE PARLIAMENT that passed the Town and Country Planning Act of 1947 was alive to the pressing need, in bomb-cratered Britain, for bricks and mortar. If the post-war governments, Labour and Tory, had a consistent north star, it was building homes. Winston Churchill, returned to office in 1951, listed his priorities as “houses, red meat and not being scuppered”.

MPs, though, were concerned by “urban sprawl”. On the Labour government’s benches was a zeal for extending state control, including over property rights. And so they came to pass a landmark law—among the first of its kind—that prohibited all private development without explicit permission. No longer would land ownership confer the right to build; that power would rest instead with the local council.

To its architects, the act was not only about preventing undesirable construction around big cities. It meant the very fabric of the country would be—the critical word—planned. The state would build a “New Jerusalem”, with platoons of urban planners and labourers, modern layouts and designs, and wholly new towns replacing inner-city slums. Nascent opposition would be placated.

That is not quite how things have turned out. In fact if you were to survey eight centuries of laws on Britain’s statute book, it would be hard to find another that has backfired so spectacularly. Opponents of new housing were not mollified, but empowered. As homeownership rose, the restrictions on building only tightened.

This is the problem Sir Keir Starmer’s government will try to grasp when it lays a planning and infrastructure bill before Parliament later this month. And to listen to the prime minister’s fiery speeches, strewn with vanquished “NIMBYs” and “naysayers”, you would think he is ready for the fight. His MPs (rightly) see this as this government’s most plausible route to higher growth (and with it better-funded public services, or higher defence spending). They believe they are seizing it.

Yet talk to those more immersed in the absurdism of Britain’s planning system, and the story is rather different. “They are assuming the creators of the 1947 system were broadly right,” says John Myers of the YIMBY Alliance, a pressure group for home building. “They have shied away from real reform and are trying to patch over what is broken,” says Christian Hilber of the London School of Economics. “They’ve not grasped the absolute obstacles to what they need to do,” says Paul Cheshire, also at the LSE.

Few question that the government is proposing many welcome changes. Set against the scale of the task, however, the Starmer team looks to be wasting its best shot at success.

A clear way to see Britain’s problem is to look at net housing additions over the long run (see chart 1). A sharp drop in private construction in and around big cities after 1947 was at first offset by public building elsewhere. But over time opposition grew wherever homes were proposed, and councils began to grasp their new powers (a clause allowing them to raise “material considerations” offered almost endless grounds for rejection).

A nation of NIMBYs

Rather than make building popular, the 1947 act set in motion a NIMBY domino effect. In the 1950s suburban councils began to apply to designate their land within so-called green belts, where development was prohibited. Each time one did, its neighbours came under pressure to follow suit. Law also shaped culture more subtly. A property-owner’s ability to object to any change in their locality began as a novelty. It soon became a right.

In turning its councillors into little emperors, Britain was an outlier. Some other English-speaking countries also adopted similar “discretionary systems”, though none so restrictive. Seeing what had happened in Britain, most European countries opted for simpler and more predictable zoning systems, whereby proposals are approved as long as they comply with an agreed set of rules.

House building rises and falls with economic cycles. But the tightening grip over Britain’s land supply is clear in the data, which show a steady decline in building rates over 80 years, hastened by the collapse of public building. Today Britain has about the same population as France but 7m fewer homes. If it had just kept up with the average country in western Europe, it would have 4.3m more homes, according to Samuel Watling and Anthony Breach, a pair of housing researchers.

Another way to see the problem is to look at the price of land. The area beneath all the homes in Britain is worth around £4trn ($5trn). That is around two-thirds of the total value of housing, a much higher proportion than in almost any other rich country (see chart 2). The vast majority of that figure, says Mr Myers, is accounted for not by the land itself but the value of planning permission. Developers are left with less for bricks and mortar, which helps explain why homes are not only scarce, but cramped and shabby.

They are also in the wrong places. Between 1980 and 2018 more than 56,000 houses were built in Burnley and Doncaster, a pair of declining ex-industrial conurbations. That was almost twice as many as in Oxford and Cambridge, high-wage university towns. Britain builds homes not where they are needed, but where opposition is weakest.

Economists have modelled the benefits of scrapping restrictive planning laws. Looking at seven American cities, Gilles Duranton and Diego Puga estimated that allowing workers to live closer to jobs could raise output per person by almost 8% over the long run. In Britain, where the rules are most restrictive, the benefits of simply making growth legal in this way could be even higher. It is the most obvious lever for boosting growth.

The strange thing is that Labour seems, or seemed, to share much of this analysis. In her Mais lecture a year ago, months before she became chancellor, Rachel Reeves said Britain’s planning system had throttled the country’s most productive cities and was the “single greatest obstacle to economic success”. To unlock the benefits of agglomeration, there was “no other choice” but to overhaul it.

In government Labour has instead decided to try to repair it. Matthew Pennycook, the housing minister, reasons that changing the system would take years; in the meantime house builders would down tools, rendering Labour’s target of 1.5m homes over the parliament (which many experts say is too few) unreachable. To some this sounds overly timid from a government with a 170-seat majority.

Brick by brick

Labour can point to several glaring problems it has already set to work on. It has reintroduced and strengthened targets in effect abandoned by the previous Tory administration. Under Britain’s system, this is the best stick Whitehall has for beating councillors into accepting more housing. Ministers have also started to “call-in” projects including the infrastructure needed for new homes. In January Ms Reeves said that nine reservoirs had been approved with the stroke of a pen.

The government has also revised the definition of green belts. Such a move had the potential to be radical: the Centre for Cities, a think-tank, estimates that you could build 2m suburban homes on just 2% of green-belt land. But rather than targeting the land best suited to housing, the revision focuses on the “grey belt”, meaning previously developed land, such as disused petrol stations and car parks. These sites are relatively scarce, which will limit the change’s impact, says Tim Leunig of Nesta, a think-tank.

The bill will go beyond this in five areas, all of which have been consulted on and briefed out ahead of the government’s formal announcement. The government will strip quangos of their ability to hold up projects by insisting that developers mitigate environmental damage in advance. It will reduce the number of statutory consultees on projects and limit the scope for judicial reviews. The grounds on which local planning committees can reject compliant projects will be reduced. Councils will be given more powers to compulsorily purchase derelict sites. And “brownfield passports” will aim to increase the supply of urban land.

All these ideas are good. The change on quangos, for example, is designed to fix the law that led to HS2, a rail company, building a £100m “bat tunnel”, and tackle the “nutrient neutrality” rules that have gummed up many large housing projects. Tweaking planning-committee rules could make the discretionary system less unpredictable. Taken as a whole, the changes will boost house building.

But they are unlikely to make a big difference. Mr Cheshire doubts they will even be enough to meet the government’s target. That is because they will not fix what is broken, and whatever advances they achieve will be all too easy to reverse.

The central problem is that the planning system that the 1947 act created will remain intact. Most rich countries use zoning, not because they are market zealots but because such systems achieve better results. Zoning systems are no less inherently democratic or aesthetic than discretionary systems: locals can decide on design codes. Auckland offers a recent example of how zoning reform can lead to more houses, lower costs and happy residents. Such a scheme could be piloted in London or Manchester.

That would help tackle a second flaw: Labour’s plans will not fix the distortions that push building to the wrong places. Ms Reeves was right that Britain needs housing in and around cities. Yet just as in the past, Labour remains more interested in using the power of the state to build across the country. The government has existing powers, called special development orders, to make building upwards in cities easier. It has shown no interest in using them; instead MPs talk of loading developers with more affordability requirements. If it is hellbent on new towns, it should build them only close to London.

The third, perhaps most fatal, problem is that the bill does not tackle misaligned incentives. For all that ministers are equipping themselves with bigger sticks, local areas will still see little benefit in approving development. That means the system relies on top-down pressure, which tends to fade when a government falters or the voting booth beckons. Labour may have assembled the most pro-growth voting coalition Britain has seen. It will still face dozens of fights in tricky marginals.

Build, labour, build

What Britain needs, says Nick Boles, a former planning minister, is a system that churns out more homes at a “steady run rate”. Mr Hilber notes that, in his native Switzerland where building rates are twice as high as in Britain, municipalities compete to make land available for development, to attract local taxpayers. But having ruled out bold tax reform or fiscal devolution, Labour has shown little interest in other ways of better aligning incentives.

As the bill works its way through Parliament, the fight that matters is not with the opposition. Labour’s majority means it will pass, with only amendments the government wants. Instead, it is a battle between two departments. The housing ministry led by the deputy prime minister, Angela Rayner, holds the pen; institutionally, it remains a bastion of the view that “everything planned is good, the market can’t be trusted”, as a former employee puts it. The Treasury has long championed a different approach. Recently Ms Reeves has made some forays into Ms Rayner’s patch, with vague talk about introducing “zoning” near railway lines (the housing ministry denies a zoning system is being considered).

What is remarkable is that, just a few years ago, many British political analysts saw the 1947 act as an electoral booby trap that could not be defused. It was hard to imagine a government that could overcome the apparent interests of homeowners; planning reform would remain in the “too-difficult box”. And yet, here Labour is, with a whopping majority and a mandate to remove Britain’s 80-year chokehold. It would be a shame if it wasted it. ■