Tom Papworth: Planning for growth and prosperity

Tom Papworth is an independent researcher, policy analyst and writer. He was Director of Policy at Liberal Vision from 2009 to 2011 and continues to contribute to their work. He is a Fellow of the Adam Smith Institute and is currently working at the Institute of Economic Affairs. Tom is also a local councillor: he sits on two planning committees and has represented residents at planning appeals and public enquiries.

With budget day on the horizon, there is intense pressure on the government to find ways to stimulate growth. But it is widely recognise that the Chancellor has very little wriggle-room. Further significant cuts seem off the agenda, and the world can do without more unfunded spending promises. What is needed is a way to boost the economy that costs the government virtually nothing and about which a consensus exists among economists.

While that may sound like a tall order, there is just such an opportunity. Britain’s unbelievably centralised planning system places a straight jacket on our economy, forces people to live in small, expensive accommodation and leads to perversely negative environmental outcomes. Every serious economic study finds that our planning regime is deeply flawed, and yet it remains one of the great pillars of the post-war socialist settlement, virtually unchanged in 65 years.

In a report released earlier this week by the Adam Smith Institute, I argue that we need to tear up the Town and Country Planning Acts and privatise development rights.

We know there is a problem. For decades we have built too few homes, which is why housing is absurdly expensive, first-time buyers are priced out of the market, individuals struggle to buy homes in the villages and towns where they grew up, and modern housing frequently resembles “rabbit hutches built on postage stamps”. The planning system is seen as a barrier by 98 per cent of businesses. And policies aimed at preventing “urban sprawl” have merely displaced development from the fringes of cities to dormitory towns – often sacrificing more environmentally valuable land just outside the green belts.

At the root of the problem are four features.

• People have a mistaken understanding of the extent of UK development. Survey evidence indicates that two-thirds of the electorate believe that more than two thirds of the UK is urban. This is fed by organisations like the Campaign for Rural England, which claims that “Our countryside is vanishing under new housing”. In fact, just 10% of Britain is “developed” -  and a quarter of that is back gardens.

• Planning is a winner-takes all system; it seems almost designed to prevent an outcome that satisfies all parties. This makes NIMBYism rational: if there is no compensation, neighbours have every reason to fight it and none to acquiesce. Indeed, the lack of compensation is quite remarkable: generally, if one’s actions cause losses to another party, one is expected to compensate them; this should be the case with planning as well. And a system whereby developers compensated third parties would encourage third parties to really weigh the value that they place on amenity and enable mutually beneficial outcomes.

• Planning is too politicised. Planning decisions are biased towards those who are already in situ, better organised, more eloquent and better able to play the system. Future residents, those who are extremely busy and those who are less capable of expressing themselves at public meetings lose out.

• And it is too regimented. The government lays down vast swathes of regulation that affect every corner of the country; the rest is dictated by local authorities that span hundreds of square miles.

What is needed is greater devolution, greater experimentation and greater pluralism in how we plan for development. This means not just devolving power from Whitehall to the town hall, but giving tradable development rights to individuals and allowing them to form Proprietary communities – small, private bodies, owned by the landowners in the local area, that would set the overarching rules and procedures, just as freeholders do over leaseholders, or the owners of shopping centres do over individual concessions.

These would inevitably be smaller and thus more "local". Planning decisions are very often extremely local: they can affect one end of a street enormously and have almost no impact on the other end. There is no reason why people across the other side of the borough of district need to be involved, or why the same regime needs to apply across a 150 square mile area.

With government out of the way, these proprietary communities would be free to experiment and even compete to provide the best planning environment – the most suitable balance of development and amenity for that locale. This would enable the trial and error process by which freely acting individuals collectively find better solutions to life’s challenges.

And it would be possible for individuals, families and even communities to shift between systems, depending on how successful and attractive they were. When was the last time you were allowed to opt out of the mechanisms provided by your local authority if you were unhappy with them?

A market in development rights should not only benefit developers: it should also benefit conservationists. Conservation groups could buy development rights to prevent their use, thus enabling the subjective values of conservationists and those supportive of development to be measured against one another. It would be possible to design the system such that development in environmentally sensitive areas is explicitly linked to promoting conservation (as has happened in the US in Kern County and the New Jersey Pinelands, for example). And conservationists would retain the ability to take out covenants on pieces of land to prevent future development – a practice that has waned since the nationalisation of development rights in 1947. Indeed, developers themselves may take out covenants on neighbouring land, so that buyers could be confident that amenity will be protected once they’ve moved in.

The government has made a start by proposing to scrap 1,000 pages of regulations and replace them with just 50. At least planning may now be accessible to most people. But it needs to go further. Development rights should be privatised; the law should require developers to compensate third parties; proprietary communities should be free to experiment with new ways to plan; and government restrictions should be scrapped.

This would unlock enormous value, creating hundreds of thousands of construction jobs, enabling improved retail space that would (for example) bring food quality up and prices down and make hotels cheaper and better, and allowing a much-needed improvement to infrastructure. It would also ensure that the next generation could afford to buy houses, and ones that were of a decent size and in generous plots of land.

And all this would cost the government nothing.