Policy Exchange Policy Cities for for Growth Cities Growth Solutions to our planning problems Alex Morton Cities for Growth Solutions to our planning problems Alex Morton Policy Exchange is an independent think tank whose mission is to develop and promote new policy ideas which will foster a free society based on strong communities, personal freedom, limited government, national self-confidence and an enterprise culture. Registered charity no: 1096300. Policy Exchange is committed to an evidence-based approach to policy development. We work in partnership with academics and other experts and commission major studies involving thorough empirical research of alternative policy outcomes. We believe that the policy experience of other countries offers important lessons for government in the UK. We also believe that government has much to learn from business and the voluntary sector. Trustees Daniel Finkelstein (Chairman of the Board), Richard Ehrman (Deputy Chair), Theodore Agnew, Richard Briance, Simon Brocklebank-Fowler, Robin Edwards, Virginia Fraser, Edward Heathcoat Amory, David Meller, George Robinson, Robert Rosenkranz, Andrew Sells, Tim Steel, Rachel Whetstone and Simon Wolfson. About the Author Alex Morton was Secretary to the Conservative Party’s Globalisation and Global Poverty Policy Group under the Rt Hon Peter Lilley MP. Following this he worked in the Civil Service Graduate Fast Stream before leaving to join Policy Exchange. He is the author of the 2010 report Making Housing Affordable, which won the Prospect magazine’s Think Tank Publication of the Year and highlighted the cost of current housing policies. Its central proposition was that house price stability should be a major government priority. He also co-authored More Homes: Fewer Empty Buildings, which argued for easier conversion from commercial to residential property, a policy picked up in the 2011 Budget. © Policy Exchange 2011 Published by Policy Exchange, Clutha House, 10 Storey’s Gate, London SW1P 3AY www.policyexchange.org.uk ISBN: 978-1-907689-13-0 Printed by Heron, Dawson and Sawyer Designed by Soapbox, www.soapbox.co.uk 2 | policyexchange.org.uk Contents Acknowledgements 4 Introduction 5 Executive Summary 9 Chapter One: The Current Situation 28 1 Why Cities Matter and the Stagnation in Our Cities 29 2 Where Have We Gone Wrong? 42 3 Proposed Planning Reforms Must Go Further 73 Chapter Two: Achieving Cities for Growth 84 4 New Urban Areas: Private Sector Garden Cities 85 5 Wider Planning Reform: Taking Us Out of the 92 1940s and Giving Local People a Say 6 A Functioning Model of Development 103 policyexchange.org.uk | 3 Acknowledgements While the ideas in my paper are my own, thanks are owed to Professor Henry Overman at the Spatial Economics Research Centre for providing me with useful comments on this paper, and to various other people who read through or discussed these ideas and issues with me. I also owe an intellectual debt to those who warned during previous periods of reform that we needed a decisive break from our failed planning system – but were ignored in favour of minor revisions to 1940s-style local authority plans. We cannot afford to repeat this mistake. 4 | policyexchange.org.uk Introduction This report sets out a vision of England that recognises that urban areas can be beautiful, green and pleasant. It is about the opportunities we sacrifice by holding back our cities, and the economic and social costs of a failed and failing planning system. Planning is largely about urban areas. The metropolitan regions that cover our great cities contain around a third of our population, and around half live in major or large urban areas. But the general trend is that the more urban the area, the greater the internal migration away from it; only high levels of international immigration are supporting city populations. Outside their centres our cities seem frozen, unable to regenerate, expand or develop on a large scale. Larger cities drive up worker productivity and wages, so the ability of a city to expand and change is a critical factor in economic growth. We must free our cities if we are to meet the challenge of Asia’s growing and increasingly competitive cities and raise quality of life. This report shows how a better more positive attitude towards planning and development can turn the tide and improve the prospects for our cities. It shows why our attitude to development has become fearful and narrow due to a failing planning system that has huge negative effects. Our planning system has failed in two ways: we haven’t built enough, and what we have built has too often been of mediocre or poor quality. You might think that there would be a trade-off between quantity and quality. This report shows why that is not so. Our centrally planned system fails to deliver what people want. It fails to compensate adequately those who are affected by development. It creates pressure for ugly development. Unsurprisingly, its failures have created a fear of change in our communities. The city suburb is the most desirable location for people in England, with 60% saying they want to live there. Yet often the main goal of our planning system seems to be to prevent suburban living in cities. People want to combine a family home, green space and privacy with access to the opportunities and life of the city. Expensive places like Richmond, Fulham, Hampstead in London, or Clifton in Bristol and Hallam in Sheffield, show how development can be a positive. Green belts stifle our cities by protecting peripheral and low-quality land, while forcing development into really rural areas and cramming more and more into packed cities. New urban areas are no longer even considered a possibility, despite their benefits and the fact that two million people live in New Towns built since the Second World War. High land prices caused by restrictive planning laws squeeze out design quality: the price of development land is so high that people cannot afford to build high-quality homes. Meanwhile, the brownfield development which everyone claims to support is made very difficult by pointless bureaucratic hurdles. Northern cities, far from policyexchange.org.uk | 5 Cities for Growth benefiting from the planning system, are damaged by it, (e.g. by more expensive office space than Southern cities). Last year, Policy Exchange published Making Housing Affordable. This report outlined some of the high social and economic costs of our under-provision of housing, from housing benefit spiralling towards £22 billion a year to the collapse of home ownership. This report explores further the problems our local authority controlled planning system creates. It also discusses the government’s proposed reforms. Under these, local plans remain the lynchpin of the system, and compensation for new homes will still go to councils not those living nearby. Neighbourhood plans are a good concept, but are too limited to drive change. A controversial Presumption in Favour of Sustainable Development bows to local plans. Councils will continue to decide housing numbers, with central oversight, meaning that both too few homes will be built and legal struggles between central and local government are likely. The developers’ model is bust. The actual cost of building a house is way below what it is sold for; the gap is the result of land prices, which are inflated because too little land is and has been released for development. Because of the complexity of our plan-led system developers have become land speculators, part of a dysfunctional system that can only build as house and land prices rise, meaning it will always built too few homes. Mortgage lending largely just inflates land and house prices in our inflexible and centrally planned system. It is time for a real overhaul of the planning system. Local authority control has been the centre of the planning system for over 60 years. It must be stripped back and a Presumption against Interference be made central instead. Local plans and planning should focus on genuinely strategic issues and externalities rather than attempting to micromanage every last detail of development. There should be a blitz on brownfield bureaucracy. Planning permission for brownfield development should generally be permitted unless more than half of those nearby object. This would allow many more homes, of higher quality, to be built. For greenfield development, a similar system allied to a statutory compensation scheme should be put in place for those affected by new homes. Such a scheme would reduce political opposition, while handing quality control to those near the development, not planning officials. To ensure cities can flourish, control over development in the green belt should be given to local people. Only three out of ten people disagree with the idea that there should be some development in the green belt. As part of wider reform, instead of blocking all development a green belt levy on development should be created. Where development is allowed this would pay for improvements to the green belt, like parks and open spaces. This would return to the original concept of the green belt as an amenity while allowing development on the green belt – if local people agree. This report also argues that we should start creating new urban areas again. Such projects now sound rather ambitious, but they were the norm for most of the last century, from the Garden Cities and the New Towns to London and Liverpool Docklands. The regeneration around the site of the 2012 Olympic Park shows that large-scale developments are possible in Britain if we have the will. Most rapidly growing countries are creating new cities. We propose that where they can obtain local consent, new private sector Garden Cities should be allowed to proceed near existing urban areas.