Let me start with the broader point. I was expecting to be in a small minority favouring building on the greenbelt (certainly my experience in the past). But this time felt different because there were a number of younger people in the room who were pretty vocal and very articulate about problems they faced paying for housing. Don't get me wrong, there have been problems in the housing market for many poor and young people for a long time. But - much to our shame - these people don't have much of a voice at the kind of events that debate housing markets. A new generation of young university students who find themselves really struggling do take part in such debates. I wonder if that could be a 'game changer' in terms of the direction of the debate?
My other point is a little more technical. If you do listen to the podcast you'll hear a number of people claiming that we have no housing supply problem in the UK, that the problem is all down to demand. I certainly think that demand plays a role (I'd like to see the issue of VAT on newbuild and impact fees properly addressed, for example) but I think the evidence is clear that it can't all be demand. There are then two ways of interpreting what people mean when they assert the opposite, neither of which I much like. The first is that people should stop aspiring to live in reasonable size flats and houses (possibly with some out door space). That is, we are 'wrong' to demand so much housing. Second, is that housing is the only free to enter market where demand and supply for some reason do NOT jointly determine price. I say that, because if housing supply really is flat (so that the problem is all demand) then house prices should ONLY change to reflect the cost of house building excluding land. It's impossible for this to explain 4% real price growth in the UK since 1970! It also can't explain why land with planning permission sells for £3-4m per hectare as opposed to £10k. A third possibility is that there is enough land in our existing cities but 'for some reason' this land isn't being developed (vague accusations are made against Local Authorities and developers). But it's almost impossible to explain this kind of behaviour without distortions on the supply side (taking us back to where we started - how can the ONLY problems be on the demand side).
Anyhow, an interesting debate, and I was grateful to Government at LSE for organising it. My contribution to the debate follows below:
Should we (ever) build on the green belt?
There are plenty of people who think we should not. For
simplicity, I will characterise them as belonging to one of two groups: Dark
green and light green defenders of the Greenbelt.
Dark green defenders
ask us to focus on the beautiful English countryside. They play up the
environmental and amenity value of that countryside and make the case that we
must preserve it for future generations.
Light green defenders
ask us to look instead to our towns and cities. They play up the environmental
and social benefits of building at density. Better more walk able communities,
more public transport use, better public good provision. For this group,
preserving the countryside is just a happy side effect of achieving higher
densities that must be good for all.
I find the dark green
defenders difficult to argue with. Not, I hasten to add because I think
they are right. Rather because they are so one sided, so willing to overstate
the social benefits of the countryside and so willing to ignore the large
social costs that come from restricting development.
In contrast, the light
green argument has merit. My disagreements with its proponents
more nuanced. In short I think they over play the benefits of density,
overstate our ability to deliver enough housing at higher densities and
underestimate the costs of failing to deliver enough housing. There will be
time to cover many of these issues in more detail, so I will limit my opening
remarks to focus on six key points:
Green belts (and the planning system more generally) restrict
supply and increase house prices (with a regressive impact on low to middle
income families). Hilber and Vermeulen suggest that an area moving from an
average to the lowest level of restrictiveness would see house prices fall by
around 30%.
Green belts increase
housing market volatility. At least until the recession, average house
price volatility in the UK was higher than the most volatile single market in
the US (Los Angeles). Hilber and Vermeulen
Green belts increases
office rents. Cheshire and Hilber (2008) carefully document how planning
restrictions in England impose a 'tax' on office developments that varies from
around 250% (of development costs) in Birmingham, to 400-800% in London. In
contrast, New York imposes a 'tax' of around 0-50%, Amsterdam around 200% and
central Paris around 300%.
Green belt lowers
retail productivity and the employment of small independent retailers. Cheshire
et al (2011) demonstrate that planning rules reduced productivity in a leading
supermarket chain by at least 20% while Sadun and Haskel show that small and
independent shops have been hurt by town centre first policies.
A strict green belt
policy may not allow for the true social costs of brownfield versus greenfield
development. Alex will / talked about this in more depth. By 2005, 70% of
new development was on brownfield land. We don’t know what this did to the pattern
of development within cities, or on the overall effects for the city as a
whole. Could skewing development towards city centres have come at the expense
of manufacturing and less overall growth? Brownfield land is expensive to build
on – how much does this explain current low levels of building? Was garden
grabbing a good idea? (the the share of
new homes built on previously residential land rose from 11 percent to 23
percent between 1997 and 2008; according to the Guardian, the waiting list for
allotments currently stands at 86,000 people). Green belts, brownfield targets and density standards have
also tended to produce large numbers of small flats in urban areas – although
there is a clear need for larger, family homes in these places.
In short, strong greenbelts don’t deliver the kind of development
people want in the places where they want to live. These costs need to be offset
against the benefits of preserving undeveloped land. Undeveloped land does
deliver benefits, but research suggests that – particularly for high intensity
agricultural land at the edges of our towns and cities – these benefits are
often not as large as claimed (Gibbons et al 2011).
Time, perhaps, to start building on (some of) the greenbelt after all?
