1. Are planners really the problem?
Christine Whitehead
 Emeritus Professor of Housing Economics, HonMRTPI
RTPI Nathaniel Lichfield Lecture 2018
London School of Economics
November 8th, 2018

2. A Talk in Three Parts
This is an incredibly wide topic so am going to restrict myself mainly to issues around new build.
The first part will be mainly about diagnosis – what are the main barriers to delivery and how much they are related to planning.
Then I will talk about a few of the initiatives where I have lately had some direct involvement.
Finally, I will conclude with a more personal view – including an answer to the question in the title.

3. New Build – how are we doing?
Government targets have consistently been between 220,000 and 250,000 for England) - defined in terms of net additions, not completions.
Current target 300,000 can be seen as aspirational - ie would improve conditions as opposed to simply maintaining them (although not enough to affect prices).
Some suggestion that one third of these should be in London!
2016/17 figures were 217, 350 of which 39,560 (18%) were in London.
However, new build rates are declining – with housing starts 4% down in the second quarter 2018 as compared to the first quarter and the same quarter in The decline in London was around 12%. Blamed on Brexit and tax changes - not planners.

4. Net new additions this century: market volatility

5. Looking Back – we really are doing quite well

6. But components/definitions very different

7. Barriers to increasing delivery
What is clear is that private sector completions have rarely exceeded 150,000 per annum – indeed in the last 40 years they only went above 150,000 in 1987, 1988 and 1989.
In they were running at 134,000 out of a total of 163,000 (82%) as compared to 154/177,000 (87%) in 2007 just before the financial crisis.
In 1978 the figures were 127,000/241,000 (53%) – reflecting the greater importance of public sector building.
Vast amount of discussion around the relative importance of different barriers to increasing delivery of new build homes in current conditions – with planners, rightly or wrongly, taking a lot of the blame.

8. Are Planning Principles the Issue?
Nationalisation of development rights in 1947 generating a system of individual planning permissions within a national framework – now structured through the NPPF.
Local Plans introduced in 1990 and were intended to generate greater certainty - but many would say simply added a further expensive stage. Continual modifications have simply increased uncertainly.
From 1990 S106 added a further layer of uncertainty. Then CIL in Planning Act.
Since last year’s White Paper, large number of policy modifications to ensure land availability and now delivery - have added complexity and cost – not clear whether they have improved outcomes.
Current emphasis on up to date Local Plans as the core of the planning process will face similar challenges.

9. Are particular planning policies the issue?
The one which gets the most attention is Green Belt –aimed at limiting urban sprawl and providing open space;
Introduced in the 1930s in London but nationally as a result of Ministry Guidance in 1955;
Currently 1.6 million hectares of Green Belt in England around 12% of the land area – compared to 1.4 million (10.6 %) urban using general definition of urban;
Most people when asked assume it has shrunk – but the reality is that it was significantly extended in the 1970s (although often simply by change in designation).

10. Are particular planning policies the issue?
Particularly important in London where, at 516,000 hectares, it accounts for one third of overall total;
22% of the area within the GL boundary is Green Belt (but accounts for only 7% of the overall London Green Belt);
Much of the Outer Metropolitan Area is Green Belt making it extremely hard to increase housing output - even when definitely not green, very well connected and the local authority would love to release it.
Massive political issue at both national and London levels.

12. Are particular planning policies the issue?
But other national policies are also important in constraining available land;
Including brownfield first; regulations on the environment; flooding, energy efficiency, climate change etc;
Sometimes inconsistency between types of homes required by LA and what the market will accept;
The complexities of the permission/planning obligation processes result in high costs and long timescales;
Refusals and unexpected delays further add to costs and risks.

13. Is Density the Issue?
If bringing in additional land is problematic can the shortage be alleviated by higher densities?
What type of density – planning or population?
Does higher density mean higher rise?
Does higher density mean higher costs?
Does it increase the prices for lower density housing?
Evidence of 2004 – 2011 is that density increased, but output levels did not - so simply using less/higher priced land?

14. Density and Built Form

15. London Bedroom Densities 2008-14 relative to 2008 Plan standards (green area)

16. Are local authority incentives the issue?
The incentives that local authorities have are mainly to keep their existing voters happy rather than to help outsiders.
It is rational to be a nimby if the results of development negatively affect your immediate environment – and to blame the council.
So incentive to Local Authorities is often to go for less accessible sites even if they have lower potential value – really difficult to go for high value added sites which impact on more local households.
Equally, easier to go for a smaller number of large, brownfield sites which are not close to established residential areas.
The result can be low valued sites generating poor quality/location housing.
On the other hand the need for money from S106, CIL and New Homes Bonus can incentivise over densification.
Often few incentives to co-operate with neighbouring authorities even when clearly socially beneficial.

17. Is the structure of the development industry the issue?
Certainly the case that a small number of large developers build most of the homes; almost all were heavily restructured after the financial crisis.
The numbers and proportion of smaller builders have undoubtedly fallen consistently: in ,000 SME builders built some 40% of homes; now around 2,500 build 12% of the output;
One third of SMEs went out of business immediately after the financial crisis.
Massive entry barriers in terms of costs of achieving planning permission, access to finance and the land market.
Can smaller builders really build out more quickly and do they face additional constraints?

18. Are large sites the Issue?
Large sites are seen as requiring large developers – even if sub contract /multiple providers etc.
Developer model of build out rates will tend to drip feed the market – aspect of oligopoly structure.
Potential benefits from more diversified development models –role of direct commissioning and growth of Housing Association involvement; also varying tenures - Build to Rent; custom build etc.
Massive issues around infrastructure requirements – water; transport etc – including timing of payments; delivery in relation to site requirements; who actually pays; effective project management.
Evidence from London between 2004 – was that half of all planning permissions on very large sites; but only 5% of the actual output from these sites.

19. Are Skills the Issue?
Most skills are available more widely than just the housing construction sector.
However, bricklayers and longer term issues (Brexit; age of workforce; working conditions) identified as major issues.
Modern Methods of Construction - potential benefits of speed of delivery, different workforce; no snagging but needs scale and certainty. BUT always in the future? - maybe re-name digital construction?
Also construction is a relatively small part of the development timeline.
Anyway if land not available will lower construction costs simply add to land prices?

20. Is Demand the Issue?
The assumption made by government is that housing need (by whatever definition) is supported by demand.
Owner-occupied demand restricted by mortgage regulation, uncertainties in the labour market, economic prospects, etc.
Demand for rental properties negatively affected by changes in taxation system as well as declining rental returns;
Potential price reductions raise issues of negative equity and confidence in the market (easier to address in an inflationary world) – as well as political concerns;
If not market demand then basically has to be social demand supported by subsidy if large scale investment is to occur.

21. Ways Forward - avoiding the planning system?
Permitted development
does not require individual planning permission and makes no contributions via s106 or CIL;
major issues around quality and size standards – and in some areas loss of smaller office space;
but a short term fix?
Planning in principle (our RTPI report)
aim is to reduce risks and help a wider range of developers;
but shifts costs to local authorities and doesn’t provide certainty.
Arguably, local authorities building on own land via development arm or joint venture and giving themselves permission - as in the 1950s/60s?

22. The Letwin approach and development corporations
Extending the development corporation model;
Slow build out rate seen to be about homogeneity of product – so wishes to require greater diversity on large sites (1500 and over) in high demand areas – with a range of new entrants to the industry; other issues seen to be outside the build-out stage;
Expert panel to advise LAs on suitable mix and to arbitrate between LA and developer;
All large sites coming forward must the identified as a Local Development Company or equivalent with LA rights to purchase land, master plan etc;
Plan should ensure that price of land will be no more than10 times existing use value through diversity decisions;
Clear issues around optimal use of sites; potential for inefficiency; management slack and identifying existing use value.

23. Planning Obligations and CIL
Latest changes suggested by government are mainly to do with streamlining process and increasing transparency.
Major initiative lies in an increasing emphasis on (non-negotiable) CIL and away from (negotiated) S106. Said to increase certainty and speed up process.
But changes in rates over time and uncertainties about when /indeed whether CIL will be spent make it less certain.
Affordable housing still remains separate on residential sites.
Large sites do not fit the CIL model – could lead to lower take.
Extend the use of strategic CIL (to be called SIT - strategic infrastructure levy).
Issues around delivery on infrastructure and CIL spending.
How to pay for infrastructure outside London and the South East?

24. Household Projections and Housing Need
MHCLG has just gone out to consultation for the ‘nth’ time.
Objective is to use a single, centrally determined, model of household projections to be used by every local planning authority which will give certainly and enough housing;
However the quality of data is quite inadequate – and the principles of projections takes no account of causality.
Large declines in ONS estimate of projections – down to 159,000 pa from 210,000 in last estimate.
Current estimates at local level bear little relationship with either land availability or market demand.
Result is that currently local planners can hardly do their job.

25. And what about macro- economic pressures?
Brexit;
Bank of England position on financial stability – if housing market suffers it is too bad?
Impact of Quantitative Easing on asset prices and therefore housing affordability – and household formation;
Stamp Duty increases on rented properties and second homes and reduced activity in existing market;
Changing taxation of Buy to Let reducing the incentive to invest in private rented sector;
Confidence; confidence; confidence

26. Conclusions
It is not planners but rather planning policy and the system of individual permission system that can be blamed – at least partially.
On the system moving towards zoning would undermine local democracy and would generate equivalent although different problems.
On policy while planning policy is located in MHCLG, large proportions of housing policy which impacts on decisions to build are not under its control.
Anything to do with money is basically under the control of Treasury; anything to do with financial regulation and pricing is with the Bank of England.
And there’s always the issue of that politics can dominate rationality.
Finally, the new build market is easy to stop but much more difficult to re-start.
Some of the planning policy initiatives will help; some are entirely unproductive – all, at least initially, generate delay.
But ultimately macro-economic factors are far more important in terms of generating housing output.