WIREDGOV

New study tests the theory that levels of home ownership have a negative effect on housing planning decisions in England

It is often assumed that homeowners oppose new homes being built in their area but do we know this for a fact?

Following the publication of the Lyons Housing Review, a new paper published recently by the Institute for Government tested the theory that planning decisions are being distorted in favour of current homeowners.

This new research by Miguel Coelho and Vigyan Ratnoo, and funded by The Economic and Social Research Council, provides empirical support for that argument using English data for the first time. 

We found that when looking at the growth of housing stock in local planning authorities from 2001 - 2011, a 10 percentage point higher proportion of homeowners is associated with a 1.2 percentage point lower growth in the local housing stock (this is sizeable considering that the average growth of dwelling stock was 8.75).

There is a recognised nationwide housing crisis, especially in London and South East of England, and strong empirical evidence indicating that rising house prices and problems of housing affordability in England are, at least in part, related to supply constraints imposed by the planning system. But what really drives these overly-restrictive supply constraints is less well understood. Despite attempts by successive governments to tackle the problem, the housing deficit remains a tough challenge to meet for politicians and local authorities.

The paper ‘Housing that Works for All - The Political Economy of Housing in England’ looks at why the English  planning system contributes to the shortage of homes and how some countries reformed their planning systems to manage increasing demand for new homes.

Evidence reviewed in the paper suggests that three features of the English planning system (and the institutional environment where it operates) increase the risk of planning decisions being biased in favour of current homeowners, adding to supply constraints.

1.       Weak or absent city-wide/regional planning coordination - planning policy is operating exclusively at the local level and is responding to the interests of local residents;

2.       High fiscal centralisation / limited local fiscal autonomy - often new development implies additional costs for Local Authorities (ie investment in local infrastructure, in additional capacity for public services), while the increase in revenues is rather limited. So Local Authorities themselves have few fiscal incentives to allow more development;

3.       “Development control” – the English planning system requires any change of land use to be subject to planning permission. This not only makes planning decisions slower and more uncertain, but in the process, gives multiple opportunities for other people who might want to oppose new development to do so. Those more likely to be against planning for new homes are those who currently own them.

The paper presents new empirical evidence which suggests that the risk of planning decisions responding mainly to the interests of current homeowners is real and economically significant. It found that between 2001 and 2011, the housing stock grew significantly less in local authorities with higher proportions of owner-occupiers amongst local households.

So why not reform the housing planning system?

There are many reasons why reforming the housing planning system is hard in England: Rising numbers of owner-occupiers and rising house prices from the late 70s fostered opposition to development from those benefitting from this. Second, housing wealth is inextricably intertwined with the UK financial system and the wider macro-economy, limiting the scope for fast, radical reform. Third, successive governments have struggled to find a balance between regional/national planning coordination and preserving local democratic legitimacy.

But the paper argues that housing pressures are becoming so severe that they are triggering a shift in public perceptions and/or a rebalancing of the political influence of groups (e.g. current homeowners vs renters and prospective homeowners) and that this may open up the opportunity for reform.

IfG Fellow and co-author of the paper, Miguel Coelho, said:

“A common accusation is that planning decisions tend to cater for the interests of current homeowners, rather than allow for a wider, more balanced set of interests. New empirical presented in this paper lend support to this hypothesis. Our analysis shows in particular that in the decade to 2011, housing stock grew significantly less in local authorities where there were higher proportions of owner-occupiers amongst local households. Credible proposals to reform the planning system should address this problem and ensure that planning decisions allow for the full breadth of interests affected by development.”

Other insights show that despite the availability of land that could be used for housing development i.e. brownfield sites and green spaces within the commuter belt of London and despite the clear chronic shortage of housing stock, the number of planning refusals for those areas is higher than it is in other areas.

The study also looks at how other countries and states have reformed their planning systems to manage rising demands for housing:

Between 2002-09, New York’s City Planning Commission led changes in planning regulations covering 20% of the city’s land area. In some areas in Australia and the U.S. (e.g. Florida and Maryland) there was a shift of the balance of planning powers from the local level to the State level,  designed to foster a more environmentally sustainable housing growth pattern. The city of Vancouver, often presented as one of the best places to live, adopted participatory approaches to city wide planning in the mid-1990s, with new development planned after extensive public engagement, and led by a regional federation of municipalities.

View report: http://www.instituteforgovernment.org.uk/publications/housing-works-all