The Debate – Would Zoning Acheive Better Planning Outcomes

Centre For Cities? muses on its blog a month after its report on housing inequality and the planning system.  Some comments of my own below each section.

One of the key recommendations in our report is that policy should shift towards a zoning system in which most housing is built by-right, as in Japan and parts of the US such as Houston. London Yimby has made the point though that many cities abroad with zoning systems face similar housing affordability pressures to our expensive cities in the UK.

It is clear that the details of any such system would be incredibly important. A bad zoning system would be one which relies heavily on discretionary granting of permits and arbitrary reviews, and would essentially repeat the mistakes of our current planning regime. Such a zoning code which heavily restricts development, like that in New York City where 40 per cent of buildings in Manhattan would be illegal to build today, would be a disaster.

We’ve previously mentioned Japanese zoning as a model, as it allows lots of builders to supply many new homes in growing cities like Tokyo and Nagoya, keeping housing inexpensive. Key to its success is that, provided a proposed home complies with how the land has been zoned and national building regulations, it cannot be blocked. This idea, where once a local plan is in place, the planning system should allow people to build new homes unless the local authority explicitly says ‘no’, rather than forbidding any development until the local authority grants consent, should inform any attempts at planning reform.

Zoning systems can and has been used in many areas, and especially the US as a means of protecting the wealth of existing homeowners, through a combination of restriction on new land zoned and zoning land predominantly for single families preventing intensification.  This is another example of the ‘homevoter’ power structure where this dominates local decision making. This is at contrast to many countries especially Europe and Japan where there are ‘as of right’ powers to intensify.  A good example in the states where Minneapolis allows ‘as of right’ three storeys, and three units, on every plot.  Croyden’s three storey rule is a modest step in that direction here.  Some examples of this are mandated at a startegic or national level, for example in Japan where rules on uses and intensification are mandated at a national level. What this shows is that zoning is a necessary but not sufficient to achieving scale and quality of new housing, but it muyst be accompanied by national and strategic policies to restrict ‘homevoter’ Nimbyesque restrictions on zoning scale and form.

One response to our critique of the planning system, made well by the RTPI’s Richard Blyth, was that because the planning system has historically built more homes than today, it should not be presumed that it has a systematic problem.

Under this view, it is not necessary to radically change our current system from one where development only occurs if the council grants permission into one where most development is legal without any need for planning permissions. Though supporters of the current system say there may still be potential for some reform.

Factors such as local government’s lack of tax-raising powers, the diminished capacity of cash-strapped planning departments, and their flawed boundaries no doubt make the job of planners much harder.

I disagree with Richard here.  The highest levels of output were pre-war when we had a zoning system.  Post war they were achieved through redevelopment of bomb sites, already zoned, or New Towns where a zoning system applied.  The high levels of output where achieved through high levels of Council house building which concealed the systematic failure of the 1948 planning system to provide land for the housing market.

Another argument made by several people, including by Cllr Sean Fitzsimmons of Croydon Council, is that the wealth inequality that results from housing shortages can be addressed by building more social housing.

Social housing has a clear role to play in providing housing for people outside the labour market, including non-homeowning pensioners without savings, and those in work on the lowest incomes or in the greatest need. The welfare state can and should provide new high-quality housing in expensive cities through building by councils and housing associations.

However, more social housing will not address the underlying inequalities and issues outlined in the report. Even if many more social houses were built, the supply problems in private sector housing in expensive cities would remain. Unless all land is nationalised, there will always be a private housing sector which will require distinct policy solutions. This private sector needs to be able to operate well to reduce pressure on social housing, not the other way around.

Social housing requires council or rp owned land zoned for housing already.  In areas with the greatest mismatch between supply and demand this accounts only for a tiny proportion of the required housing stock.  Major expansion requires social housing to be a viable proportion of new housing which requires more zoning.

Another consideration, from Daniel Bentley at Civitas and addressed by the Letwin Review, is the role of “land banks” held by developers. In this argument, shortages are not caused by the planning system, but by developers buying land and then building new homes as slowly as possible to maximise their profits.

Our thinking on this is that land banking is probably a reaction to structural conditions of shortage in land for development, rather than a cause of shortages itself.

Most firms try to minimize their inputs (e.g. eggs and oil) and maximise their output (e.g. mayonnaise) relative to those inputs. Large builders don’t do this. Instead, both through buying land and by using ‘options’, they hoard large amounts of their input (land). Their output (houses) is then supplied at a rate which is low enough to avoid swamping the market in houses and decreasing prices, but fast enough to maximise profits.

Exactly, an option only ever has a value because of rising land prices because of a land shortage.

A common argument, made for instance by Guy Shrubsole at Friends of the Earth, is that our housing problems are not caused by a shortage of homes, but by under-taxation of land. Whether through mechanisms such as development charges, land value capture, or a land value tax, this position states that inequality could be reduced through the taxation of expensive land. These revenues can then be spent on social housing or other kinds of redistribution.

Taxation of land value is taxation of rent which only ever occurs when there is a shortage of land for housing.

An additional concern that is expressed is that building more houses in expensive cities, instead of expanding supply in cheaper ones, could worsen inequality between richer and poorer places, driving the North-South divide.

The differences in house prices and rents across the country suggest there is no shortage of homes in many Northern cities. So building more homes in Burnley would not address the issues they face, while not addressing the shortages in Brighton. Failing to build enough homes in the South such that house prices fail to stabilize means that homeowners in the south will become even wealthier, widening this aspect of the North-South divide.

Well said, increasing housing land in areas with shortages increases the number of persons benefiting from land wealth and reduces the level of unearned income from land.  It also reduces the number of people biding for existing housing at the margin and therefore drives the ‘filtering process’ whereby each new house built allows one additional household at the bottom of the housing ladder who would otherwise not be able to afford a house at the margin to be able to do so.