By Richard Johnstone | 24 October 2014
Limited fiscal autonomy for local government contributes to the under-supply of housing across England, according to an analysis undertaken for the Institute for Government.
A report by the think-tank examining housebuilding constraints also found that areas with a higher proportion of homeowners were less likely to approve new housing developments.
Today’s Housing that works for all: the political economy of housing in England highlighted there were three features of the planning system that increase the risk of planning decisions being biased in favour of current homeowners.
Among these, England’s high level of fiscal centralisation mean new developments imply additional costs on town halls for schools and other public facilities but brought limited scope for increases in revenues. Although the government has introduced a New Homes Bonus to back new homes, centralisation meant authorities still have few fiscal incentives to allow more development, the report stated.
In addition, there was either weak or non-existent planning coordination between authorities in a region, while the requirement for any change of land use to be approved meant those opposed to new homes had ‘multiple opportunities’ to campaign against them.
The report concluded that those who already own homes were more likely to be against planning approval for new developments. Between 2001 and 2011, areas with a 10 percentage point higher proportion of homeowners had 1.2 percentage point lower growth in the local housing stock, authors Miguel Coelho and Vigyan Ratnoo found.
‘A common accusation is that planning decisions tend to cater for the interests of current homeowners, rather than allow for a wider, more balanced set of interests, Coelho, an IfG fellow, said.
‘New empirical evidence presented in this paper lend support to this hypothesis. Our analysis shows in particular that in the decade to 2011, housing stock grew significantly less in local authorities where there were higher proportions of owner-occupiers amongst local households.’
He said that credible proposals to reform the planning system should address this problem as well as ensuring that planning decisions ‘allow for the full breadth of interests affected by development’.
