Our planning laws provide vast blocking opportunities for the Not-in-my-backyard (Nimby) politicians and campaigners, who always argue theirs is not the “right area” for development. Nigel Huddleston, Conservative MP for Droitwich and Evesham, quickly slammed Reeves’s speech for championing a specific proposal in his constituency. Mandatory targets are thus a necessary counterbalance to our Nimby-friendly planning regime and its Tory handmaidens.
Centrally planned housing targets, however, are certainly not ideal and Reeves’s ultimate goal should be to not need them. Governments can’t estimate the “correct” number of houses, evident in the 4.3 million shortfall we have today relative to the average European country.
Moreover, previous government plans have failed to allocate homes well geographically. The economist Paul Cheshire’s research shows that between 1980 and 2018, Barnsley and Doncaster added 56,340 new houses with a combined population increase of nearly 23,000 people, whereas Oxford and Cambridge, with a combined population increase exceeding 95,000, saw only 29,430 new houses built.
Reeves’s local housing targets, if matching previous Conservative efforts, will be weighted towards an area’s projected population growth. Yet this Soviet approach of target by “need” over “want” overlooks existing pent-up demand and how rising incomes or new business opportunities drive demand higher. It also ignores the fact that unaffordable housing in an area — shaped by restrictive planning laws —itself deters potential residents, reducing population growth.
A functioning market shouldn’t require such people-counting. Areas experiencing rising demand ought to see more construction, yet our planning laws hinder development where demand is strongest. LSE economists have shown that Help-to-Buy subsidies, for example, fuel only price increases in Greater London, where planning restrictions are tight, while boosting housing construction on the English-Welsh border, where planning is lax. Over time, the planning regime ensures houses aren’t where people would really want them.
The Conservatives, under Boris Johnson, considered weighting local housing targets by affordability metrics so that new home building better tracked market price signals. That is, until the Tories realised the resultant “mutant algorithm” implied mass housebuilding in their shires. They then pivoted back to heavier weighting on population growth and forcing more development into urban areas, before Rishi Sunak abandoned targets entirely.
The lessons from all this are clear: governments cannot replicate a functioning housing market through centralised planning. No algorithm can predict what housing people want and where they want it, and second-guessing this will soon get abandoned when the political implications get difficult.
While using targets to counteract existing bad planning laws is defensible, what we really need are more enduring, institutional reforms. We must make more land available for development in general and consider adaptive zoning laws, whereby applications complying with land use and building codes get approval automatically.
Reeves clearly understands the housing challenge. She has started very well. Yet one feels she has a once-in-a-generation opportunity here to really get this right. Doing so will require both resolute political will and completely overhauling today’s paradigm.
