The government has announced an amendment to the Localism Bill currently working its way through Parliament. It will amend Section 70 of the Town and Country Planning Act 1990 (“determination of applications for planning permission: general considerations”), in order to make “local finance considerations” material when local planning authorities decide whether or not to grant planning permission.
This sounds arcane, but it isn’t. The previous government instructed local authorities to grant planning permission, by forcing them to draw up plans that had to meet national criteria. Whether they liked it or not, local authorities had to give planning permission in some cases, or they would lose on appeal.
Localism sweeps this away, at least in theory. But the government knows that localism without incentives means nimbyism will triumph everywhere. That is why it has created the New Homes Bonus policy, which gives councils money to say yes to development. Top down targets would be replaced by real incentives. Many of us think the incentives too small, but the idea is surely right. It turned out, however, that councils were not legally allowed to consider the New Homes Bonus when deciding on whether to grant planning permission.
The government had created an incentive that local authorities were legally obliged to ignore. Hence the amendment: an incentive cannot work if it is illegal to be incentivised by it.
Not everyone is happy with the amendment. The Royal Town Planning Institute has described it as “completely unacceptable”, although in reality their members will surely accept it if it is passed into law. Civil disobedience has never been a feature of RTPI campaigns.
We need to understand why organisations like the RTPI oppose this amendment. The answer is that planners see the planning system as working very well. They do not see the localism and incentives agenda as a sensible way forward. Yet to any outsider the planning system has failed.
Housing in Britain is preposterously expensive by almost any benchmark. Relative to earnings, house prices and rents are very high in most parts of Britain. They are also high by almost any international standard. We are getting richer – at least in the medium term – and yet our houses are getting smaller. That makes no sense, and makes us almost unique in the developed world.
The top down planning-led system has not delivered enough land for housing, or given builders the incentive to build out the permissions that they have. The same is true for land for other uses. It costs more to rent an office in Birmingham than in San Francisco. Is it any wonder that Birmingham struggles to attract internationally footloose businesses?
The government’s policies on housing and planning are confused in places. It is odd to have a minister for planning and a separate minister for housing. But the basic approach of localism with incentives is the right one.
Offering incentives, whether to people immediately affected by the development, or to the wider community, holds open the possibility that people will favour development, rather than oppose it. Then we will get more development, which means greater affordability and fewer people badly housed. Incentives have to be material, in every sense.
The only point of the New Homes Bonus is to persuade councils to say yes when they would otherwise say no. This amendment must pass.
Tim Leunig, chief economist, CentreForum