Developers should compensate those affected by a proposed development, suggests Professor Alan Evans in a new Institute of Economic Affairs report(*).
Before a planning proposal comes up for decision or appeal, developers should negotiate with local residents to reach an agreement on the amount of financial compensation to be paid if the development is approved. It would then be possible for residents and developers to notify the local authority, or the inspector, that compensation had been agreed.
The local authority, or the inspector, could consider the proposal as they do at present, recognising the impact, however small, on those living further out from the development. They could also take into account ecological and other factors, allowing for the fact that many would-be objectors were satisfied with the compensation they would receive.
At present, residents always oppose any development near them, Professor Evans points out. Only the extent of the opposition varies, and that can be measured by the amount of pressure put on local councillors to turn down planning applications by lobbying, petitions, letters and public meetings.
In many cases it might prove impossible to negotiate an agreed scale of compensation, but this would not preclude a planning application form being made. If development were permitted, compensation could still be paid on a scale laid down by the planning authority or by the inspector. This system would not need to run very long before “case law” and established precedent resulted in a generally agreed scale.
Professor Evans argues that a compensation scheme would not cause house prices to rise because “the price paid for land is determined by the sum of money left over after costs have been paid”. However, both land and house prices would be held down as more development took place because fewer objected to new developments and more supported them. But house prices would not fall fast or far since the payments to the local authority and to potential objectors would set a floor for the price of housing.
“These proposals would result in more development of greenfield sites in rural areas. This seems a price worth paying to achieve faster economic growth and a higher standard of living. It is not clear that in countries such as France or Italy where planning controls are more relaxed the numerous new houses in rural areas spoil the landscape, but the prices of these properties are a good deal lower than they would be in England.”
It is sometimes said that if planning controls were relaxed the whole of the South East would be under tarmac. This is pure hysteria, Professor Evans believes. Only 19% of the South East is urban and the remainder is rural. It has been estimated that even if all planning controls were taken off, the proportion that is urban would rise only to about 28% and most of the additional urban area would in practice be garden space — space which is no longer available with new homes because it is too expensive.
“The pioneers of British town planning talked of ‘garden cities for tomorrow’ and hoped that planning would allow people to move away from crowded conurbations to these garden cities. It seems a strange perversion of the ideals of these pioneers that the system they worked to create should be used to prevent people moving to the country and to force them to live at high densities in gardenless flats and terraces. It should not be forgotten that a house which is prevented from being built in rural England represents another family which cannot live in the countryside and must remain in the town.”
Time and money spent by developers in the search for permission is inefficient and wasteful, Professor Evans claims. From the developers point of view, such rent-seeking expenditure will have been profitable. From the point of view of the national economy, however, the expenditure is wasteful.
“The major part of profits from a development is likely to accrue to a developer when permission for the development is obtained, rather than from the construction and sale of houses, offices or shops. If most of the profits can be made in this way, then, for many developers, gaining planning permission will become a relatively more profitable activity than building and selling houses, offices or factories. Since property has been made a scarce commodity, more or less anything can be put up and sold. An uninspired development devoid of architectural merit may sell for less than one which is better designed, but the reduction in total profits will be miniscule compared with the profits made from obtaining planning permission in the first place.”
The effect of planning constraints on development outside existing urban areas is that house and land prices within those areas are considerably higher than they would otherwise be, Professor Evans argues. These high prices are an incentive for a high-density development or redevelopment. Accessible open space is developed to preserve inaccessible open space in rural areas.
“This reduction in the quality of the urban environment affects all the inhabitants of the urban area. So although owner-occupiers may make capital gains from the increase in the value of their housing, they are made worse off through the reduction in the quality of their immediate physical environment. The only unequivocal gainers are those, not unknown among the aristocracy of England, who live in a preserved rural area and own property in urban areas.”
(*) No room! No room! The costs of British town and country planning system. Institute of Economic Affairs, 2 Lord North Street, London SW1P 3LB. £5.50. (The title of the report is a quotation from the mad tea party in Alice’s Adventures in Wonderland.)
