Economy 5 March 2013 Playing house: the Eastleigh by-election and planning control politics Creating pro-housing planning laws won't be easy, if the Conservatives' defeat in Eastleigh is anything to go by. Print HTML Looking down on southern England from a great height, the land lacks firm and definite boundaries as to where the dominion of humanity ends and that of nature begins. English woods, fields and hedgerows appear ineffably tender, “mild, softened, rounded in things, on which hands or their immediate tools have worked;” if not the hands of those who live there, then those of their ancestors, such that not one single square inch remains free from some tinge of past or present labour. The countryside is less a place, more a world view. It should not therefore be surprising that land use is a potent political question there, as evidenced by the February 18th approval of a mere 1,400 homes in an empty field by some Liberal Democrat planners in Hampshire which wound up becoming the central issue in last week's parliamentary by-election in Eastleigh. In the decision’s wake, the incumbent Lib Dems made a desperate and ultimately successful rearguard pivot to portray themselves as pro-conservation, claiming to have “blocked Conservative County plans for housing at Allington Lane, Tanhouse Lane and Kings Copse Avenue”. Refusing to allow that characterisation to go unanswered, the Chairman of the Conservative Party responded by accusing his Liberal opponents of “misleading” the electorate and “planning to concrete over Eastleigh's countryside” while local activists counterclaimed that their “underhanded,” “Janus-faced” opponents were “parasites on the body politic.” The truth is less hysterical. Both parties are pro- and anti-development at once, with national parties broadly in favour and local parties generally in opposition. At least some of this political cleavage arises from that deeply-inscribed English parochialism which, giving Fulham in London as an example, allows local planners to admit on the one hand that “tall buildings can help regenerate an area by attracting investment” while concurrently claiming that they are “unacceptable” in any area which might interfere with “the setting of a listed building,” “open spaces and their settings” and “Historic Parks and their settings.” This approach to urban planning is clearly absurd; few would argue that the New York Public Library and Bryant Park are diminished in the least by their supertall neighbours, whereas one would struggle to describe the planning-controlled surroundings of Fulham Palace and Bishops Park as even slightly edifying. This English lack of cosmopolitan awareness is one with which those who would reform planning policy must contend, especially in the wake of the reforms brought about by the Planning Act 2011 which give local communities and councils more power to decide the course of planning applications, not less, including mandatory pre-application consultation for major planning applications (being residential developments of over 200 units or any development which brings on-line 10,000 square metres of gross floor space). The *Economist* proposes that a solution lies in understanding that Councils have “few incentives to approve building… [as they] can only extract part of the value [for approving developments]” in the form of planning gain, though such amounts are “rarely enough to calm local opponents.” To the contrary, it argues, it would be “better to change the incentives to favour development”. Take, for example, Germany, "where local authorities that attract new residents get bigger grants and more tax revenue, as well as gains from giving planning permission. That ensures a steady supply of housing, even when prices are not rising.” Such an approach might work, and the interests of councils, residents and developers might be easier to align, if the only considerations in planning control were tax revenues and government grants. It is widely accepted that the benefits of government grants, including welfare, accrue to the common landowner by being capitalised into house prices; as a study by the Spatial Economics Research Centre points out, the provision of local amenities of a financial nature such as lower rates of council tax and better public facilities including policing and schools is spending which is “valued by the marginal homebuyer.” The same cannot be said of new housebuilding, in relation to which existing homeowners stand little to gain—and much to lose. Non-pecuniary benefits of the provision of open space, such as in Eastleigh, accrue to landowners in the same way as a grant or subsidy; however, since (to paraphrase von Mises) neither value nor price are measured in money but merely consist in it, this value can be difficult for an untrained eye to identify. It can nonetheless be measured, as done in a study authored by Stephen Sheppard and Paul Cheshire. “The market price of ‘vacant’ land within an urban area”, they wrote, “reflects the supply of amenities and local public goods available at each location in addition to the value of the land as pure space with accessibility [to an employment centre],” and “land use planning determines the quantity of several amenities available at any location and also influences the overall supply” of such land. It necessarily follows that “land use planning determines the quantity of several amenities available at any location and also influences the overall supply of land as pure space,” and restrictive land use planning will constrain that supply—increasing its price. But where the distribution of land is unequal, so will be the distribution of the benefits of planning control. The authors note that while the “provision of open space that is generally accessible to the public” such as a city park “generates benefits that are significant and tend to reduce inequality,” conversely the “provision of open space that is inaccessible to the public (largely located at the urban periphery),” such as the Green Belt or fields between Eastleigh and Winchester, “generates benefits that are very unequally distributed… in a way that favours those who are already favoured with higher incomes,” namely those who are likely to own land. Overall, the authors conclude, the net cost of planning control to society is “equivalent to a tax on incomes of 3.9%,” with attendant rises in Gini inequality attributable to the provision of inaccessible open space (+3.54 per cent), restraining the availability of industrial land (+0.92 per cent), and the house price capitalization of planning amenities in general (+3.10 per cent). Which brings us back to Eastleigh, where the Government suffered the political equivalent of a dissociative episode over plans to erect less than one half of one percent of the new stock which must be built annually if the housing crisis is to ease. The by-election paints the planning system in a terrible light, little more than a rent-seeking vehicle controlled by local property owners; local planning seems just as ineffective as central planning at ensuring efficient and equitable use of the country’s land stock. Reform is prudent and necessary. As legislation exists that ensures that developers refrain from causing environmental and physical harm to their tenants, adjacent properties and the community at large, there are many reasons—the housing crisis chief among them—to let people build what they like upon land that is theirs, unfettered by political control. In a free society, this would not be a radical proposal. › The tragedy of Alice House of Commons: The Liberal Democrat MP for Eastleigh, Mike Thornton, with Nick Clegg. Photograph: Getty Images Preston Byrne is a fellow at the Adam Smith Institute. Subscribe More Related articles George Osborne's mistakes are coming back to haunt him The changing world of work Is Kezia Dugdale's tax rise the beginning of an honest debate about tax?