Regular readers will remember my obsessive interest in reforming the Town and Country Planning Act of 1947, which, you will recall, is, in my opinion, one of the most economically damaging laws on the statute book. This article by Edward Davey and Tim Leunig offers what appears to me a clean mechanism for allocating land for development. Martin Wolfe has written about this in the past, but the article by Davey and Leunig gives an explicit market mechanism, which solves many of the problems of valuation that other proposals suffer from. The wonderful thing is that it entirely gets rid of the need for planners and valuers!
If only it were that easy. The government has missed such targets for years. There is no reason to think that Britain will build 240,000 houses next year. It may even fail to hit the previous target of 190,000 houses. The reason is simple: central government has created a planning system that gives local authorities no incentive to grant planning permission. Local people generally oppose new housing and the gains councils make from “section 106” payments – made by developers to help offset the cost of local infrastructure created by a new project – are tiny.
The government has proposed a planning supplement to give councils a “modest” proportion of the rise in land values from development. Yet when this was tried before, it failed. When one company owns the land continuously its value is hard to ascertain. Further, landowners can sit on the land until the planning supplement is abolished. This policy could mean less, not more, housebuilding. No wonder Monday’s green paper promises not to introduce the supplement until at least 2009 and then only if government is unable to come up with a better plan.
