Housing: How Capitalism and Planning Can Co-Habit

Nick Boles, Conservative Party MP.jpg

Did Britain’s New Labour party conspire against land development? Is it responsible for outdated, “socialist” land planning policies?

The British Conservative Party’s favourite think tank, Policy Exchange, would have us think so. Its latest report aims to demonstrate that the British planning system is socialist rather than capitalist. Why Aren’t We Building Enough Attractive Homes? - Myths, misunderstandings and solutions, by Alex Morton takes on the British planning system that dates from the 1947 Town and Country Planning Act.

That law was enacted in 1948, when farmers gave up their right to build on their own land in exchange for a continuation of guaranteed food prices. In a genuine legal innovation, government cancelled the right of landowners to build freely on their own property, without nationalising the property itself. By 1954, Prime Minister Winston Churchill had made sure that the owners of land given permission to build by the State, through the agency of a Local Planning Authority, would be able to profit from the “betterment” or planning gain in land value. While land limited to agricultural uses was of low value, the artificial scarcity of land that was granted permission for development was then worth many times that value. Local Planning Authorities negotiated a share of that gain.

It is significant that this post-war measure survives today. The negotiation over planning gain between landowner, developer, and Local Planning Authority is big business still. Farmland in proximity to urban areas can be turned from £4,047 an acre (£10,000 a hectare) to be worth 100 times that in a development deal. Much land within the planning-approved area of Britain is worth over 1000 times the value of land without any planning approval prospect.

Nevertheless, for Alex Morton, the Senior Research Fellow for Housing and Planning at Policy Exchange, '... the 1940s system is "socialist" as it requires councils create a "socially optimal" plan then impose it on everyone. But we know in reality such changes impose clear costs and benefits on specific individual existing residents.' Seeing this as a misunderstanding of Churchill’s creation of an artificial scarcity of land that could be selectively inflated in value for profitable development after a negiotiation over the share of the gain, I wrote to Morton and suggested the obvious: that the existing planning system was capitalist rather than socialist. He wrote back, a bit huffed:

‘The current system is nothing to do with capitalism. Possibly corporatism (the use of state power to enrich a small business elite through involuntary confiscation of property rights), definitely socialism (at least in original intent given how land uplift was originally to be taken by the state).'

“Nothing to do with capitalism” … This is a myth from the self-proclaimed "myth-buster" think-tank. The 1947 Act made an entirely new beginning for post-war capitalism by repealing all previous town planning legislation, re-enacting some important provisions salvaged from previous law, and innovating significant legal principles.

His is a propagandist's mistake, made before in his 2011 report, Cities for Growth - Solutions to our Planning Problems. At no point does Morton on behalf of Policy Exchange call for the repeal of the 1947 planning law. He knows that no British Planning Minister in any government will argue for repeal of the 1947 law. The Treasury could never allow it, and the members of the Council of Mortgage Lenders would probably have such a Minister hung over the Thames under Westminster Bridge for even thinking about it. To repeal the Churchillian planning law would mean financial disturbance on a scale far more disturbing than events in 2008.

Fresh-faced Nicholas Edward Coleridge Boles was appointed Planning Minister on September 6th, 2012, and was expected to tear up the planning law. Nick Boles knows the planning system through his time with and close links to Policy Exchange, but he will no doubt conclude that the 1947 planning law must be sustained. He has the Planning Minister’s job now. In contrast, Morton’s inspiration and predecessor, Oliver Marc Hartwich, has imagined a New Labour conspiracy against development:

‘The planning system in the UK has been intended to restrict physical development, reducing economic growth as a result. In particular, Labour have made it a matter of policy that 60% of any new housing should be built on so-called “brown field sites”. This policy depends on, and results in, both high house prices and higher land prices.’

New Labour did not conspire against development. Yes they rejected “sprawl” and planned to contain development. Urban compaction reinforces the effect of the planning law. However, it is the law that planning relies upon that is having unintended consequences since it was innovated in 1947.

Planning facilitated the New Labour expansion of the fund of mortgage lending up to 2008, so that even in 2012 there is £1,200,000,000,000 of live mortgage debt generating interest. This is a volume of lending made possible by, rather than causing, house price inflation. Inflation caused by the fact that the planning system explicitly prevents people from buying a field cheaply and building a house on it, with a rate of planned new house building lower than at any time since the First World War, not the Second. The effect, by Morton’s own measure, is that in England a median priced home now costs seven times the median salary. Averages conceal other realities, but the general trend is clear. House price inflation, highest in the South and deflating unevenly in parts of the North, is inextricably linked to the planning law. Planning equals mortgage security in housing equity. For that £1.2 trillion of debt there is at least £2.4 trillion of equity variously distributed among households.

Rather than question how the planning system intersects with the contemporary character of the desperate attempt to augment low household income, or look closely at the capitalist activities of a development sector consolidated around Local Planning Authorities, Morton sees only “socialism”. In our view, the British predicament is a triangulation, characterised as:

A) Social dependence on substantial house price inflation in Britain’s political economy
B) Securitisation of mortgage lending by government through the planning system
C) Public acceptance of the low quality of an ageing and dilapidated housing stock

Capitalism in Britain depends on this being a stable triangulation, what we have called the Housing Trilemma. It is not a socialist conspiracy, as Policy Exchange imagines. It is a predicament for British capitalism that is having serious consequences for the population.

Ian Abley is a Project Manager for audacity, an experienced site Architect. He has produced a discussion paper for the 250 New Towns Club to argue the obvious: that planning is capitalist. It can be downloaded from www.audacity.org/IA-20-09-12.htm. He is also co-author of Why is construction so backward? (2004) and co-editor of Manmade Modular Megastructures (2006). He is planning 250 new British towns.

Flickr Photo by Green Alliance: Nick Boles, Conservative Party MP and brand new Planning Minister

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Libertarian Alliance


Thanks for the link to the Libertarian Alliance. I now know better where you are coming from. You also refer me specifically to Sean Gabb. Interesting indeed... For example

Libertarianism: Left or Right? (2012) Sean Gabb

Obviously Libertarian thinking has developed from the eighteenth century ideas best articulated perhaps by Thomas Paine, but also by Thomas Spence, his supporter in Newcastle upon Tyne and in London. The American and French Revolutions generated great thinking, and I have always liked Joseph Priestley in that regard, as part of the Lunar Society of early industrialists.

I will look up the Liberty and Property Defence League as a lesson.

George Woodcock's easy read "Anarchism" as a history of Libertarian thought was always a favourite of my youth, but I am probably too inclined to the no doubt "authoritarian" ideas of revolutionary communism to be admitted into anarchist circles, and detest "One Nation" state socialists - www.audacity.org/IA-02-10-12.htm

But if you know Sean or his colleagues I'll appreciate an introduction...

Ian Abley

Peter Hall in 1973


Peter Hall had a team of writers with him. It is not clear that they all agreed precisely. It is certainly the case that after 1973 Hall has shifted around. The most damning example as Sir Peter Hall being his backing of the Urban Task Force, and then his moaning that they had gone too far. Frankly, Hall is all over the place, and the TCPA are a disaster in their eco-quibbling.

Ian Abley

Thanks, and some observations on Hall and others

I appreciate your local knowledge.

Something that really annoys me about Sir Peter Hall is that there is heaps of interesting looking papers and book chapters listed on archives, dated right up till recently, yet absolutely nothing downloadable online.


One needs to have subscriptions to exclusive journals to access the papers; his books on Amazon are fiendishly expensive; and the "collections" that he has contributed chapters to are even more so.

I don’t know where to start and finish with a study of his work. There seems to be very little "discussion" of his ongoing output of paper and book chapters and so on, anywhere.

I have library-interloaned and read "Cities of Tomorrow: An Intellectual History of Urban Planning", which was extremely educational and provided me with many fruitful lines of further research. And I recently bought the Report we are discussing on Amazon because it was so cheap, and it has given me useful insights. I wish there was a "Peter Hall Reader" in several volumes; I would probably buy a recent one if there was one.

The mainstream economics profession, and many academics who are alleged to have expertise on urban economics, are so hopelessly out of touch regarding the importance of the supply of land in economic cyclical volatility, social justice, and productivity, that I tend to not look for purism in any "better" author, I am just grateful for insights that help me to assemble a comprehensive argument from multiple sources.

For example, Anthony Downs is widely regarded by the more libertarian set as a dangerously leftish, "smart growth" advocate. Yet I have found his writings to be valuable sources of insights that are valuable exhibits in the case against "urban growth containment" planning. He seems to write voluminous quantities of dispassionate observations without ever coming out and saying what the obvious conclusion is. And he seems to be content to be regarded by the "smart growthers" as "one of them".

I think you would find things that would interest you, in his "New Visions for Metropolitan America", published 1994, and his "Still Stuck in Traffic", 2004.

Another observation I would like to make, is that the more-libertarian opponents of growth-constraint urban planning, such as Randal O'Toole, are routinely smeared as "advocates" and as hopelessly tainted, yet it is THEIR work that is more often genuine scholarship, and that of the smart growth advocates that is "tainted", shallow, ideologically based, and just plain unscientific.

Peter Hall Quote


Please give the page for the Peter Hall quote from his two volume book so that I can look that up.

The 1959 Act DID NOT return development rights to freeholders.


Ian Abley

Hall et al are perfectly OK if not taken out of context

Volume 2, page 292, is where I commence taking those extracts from.

I understand fully what you mean by

"....the return of development rights to freeholders......"

But I understood when reading "The Containment of Urban England", that Hall et al did not mean their statement to apply to all land. It is quite clear to me from the context, that what Hall et al mean, is that the original legislation was meant to include the nationalisation of either the land for development, or the "gains"; and the later amendments reversed this in favour of "the return of development rights to freeholders", IN THE CASE OF LAND "WITHIN THE PLAN".

I certainly do not read Hall et al as claiming something that obviously has not happened, i.e. the resoration of development rights "everywhere"; the whole book is about the containment of urban England by "planning", and Hall et al, to my mind, seem regretful that the "nationalisation" aspect was not retained. I think you are unfair to them if you interpret their work as a kind of smokescreen for the capitalistic interests. I find it enormously and usefully "clarifying".

I certainly do, along with Alan W. Evans, argue that "the right to develop" or build is the correct solution to housing affordability and social equity problems. I will say more in response to your other comment.

Peter Hall Quote


That is the point.

There were TWO aspects to the 1947 ACT:

1) The payment of compensation for the ONCE AND FOREVER nationalisation of the freedom to build on freehold land, after which every freeholder would need to get permission from the State

2) The full recovery of development value gained on the State granting planning approval to particular freeholders

Hall is talking about the end of second case, the original attempt to capture all the VALUE from the granting of planning approval, which was ended in the 1954 Act from my reading. Maybe there were some strands of law to be tidied up by 1959 that I'm unaware of.

What he is not recognising is that the first case had happened, was completed, and meant the denial of development rights in perpetuity. It is not true that "nothing had happened". The first case meant farmers were no longer free to sell their land for suburban sprawl. It is true that in the second case, developers were able to operate in the areas that planners directed them to, and keep the profits, at least until voluntary arrangements led to Section 106 negotiations in the last few decades. Hall et al wanted planning to CAPTURE the second case of planning gain that the conclusion of the first case of compensation in the 1947 Act created. Churchill just gave the second case of planning gain back to those lucky freeholders in a position to gain a planning approval, leaving everyone else without their first case UNIVERSAL development right in freehold.

Does that make sense?


Ian Abley

I don't think you have a "disagreement" with Hall's sentiments

Yes, that does make sense. I still believe Peter Hall is on "our" side. Have you read that whole 1973 report? You absolutely should read the last few chapters (Vol. 2 of course); especially "Urban Growth: Towards a Verdict", and "Policy Alternatives: Past and Future". Hall is quite clear about "who has benefited" and why. I am looking at this now for potential quotes, and I have an embarrassment of riches.

These volumes are selling for only a few pounds on Amazon now; it seems that libraries at institutions are disposing of them, which is a shame because young urban planning students should be reading them.

Phil Best's three posts


You confuse meanings, and I'll try to explain:

1) What is capitalism?
Capitalism is an advance on feudalism, in that private property exists free of the aristocracy, and that the workforce, liberated from the idiocy of agriculture, has no means of living except by working for those with the capital to employ them industrially. The contract between the employer with capital and the worker without land on which to subsist appears fair, but the workers in aggregate produce more for the capitalist class of employers for their to be a surplus from which profit is made. There is no conspiracy. There is only the private ownership of the surplus that is produced by the social division of labour. The hope in communism defined in 1848 was that the workforce would take social ownership of the industrial means of production that capitalism had brought into being.

2) What is the free market?
The free market is an idealised state of capitalism where theoreticians dream of there being no State. The free market does not exist because markets are politically skewed all the time to favour one group of interests over another, and there is no equal ability to be able to compete in the market. Those with more political influence and the ability to invest their capital will skew the market because all capitalists are in competition. At times that competition is dynamic and advances society, and at others it is moribund or divisive. At worst it is rent-seeking and self-destructive.

3) What is the State?
The capitalist State exists to make sure that capitalists do not compete in ways that lead to the destruction of the system of profit making as whole. In representative democracies the capitalist State has developed political parties that represent reformist positions: In America the Republicans and Democrats, and in Britain the Conservatives, the Liberal Democrats, and New Labour, predominantly. These parties are shifting their ground all the time, but consistently in the effort to sustain capitalism.

4) What is socialism?
It was the lie by the Old Labour party that capitalism can be reformed to the permanent advantage of the workforce. It served capitalism well for the twentieth century, and in coalition government sent sections of the workforce to kill other workers in the Second World War. In peacetime, post-war, socialists innovated the Welfare State as a further compromise to sustain capitalism, and promised to give Local Authorities the tools for development planning. Socialism is not communism. To confuse the two is a mistake, taken to extremes by followers of Ayn Rand's conceit that the workforce can't do without the capitalist. Wealth comes from work, not capital, which is merely the way that industrial productivity has been raised... until it can't make a profit except as finance, and circulates as a fund - in our case as £1,200,000,000,000 of mortgage lending seeking interest.

5) What is planning?
In the abstract - planning is a necessity. Humans must plan to organise the social division of labour. In the sense of the "planning system" it was the post-war attempt to make development unprofitable. Winston Churchill made development profitable again in 1954 BUT kept the ability of the State to favour some landowners, and deny the others planning approval. It was, and is, the denial of development rights. AT NO POINT HAVE FREEHOLDERS BEEN GIVEN THEIR DEVELOPMENT RIGHTS BACK, no matter what planners say. If they had, hundreds of thousands of plots of farmland would be on the market at low cost, and Britain's inflated housing market would collapse.

6) Why is there no free market solution?
Repeal the 1947 Act, and freeholders will have an equal right to develop their land - to CHOOSE a plan, rather than have one imposed upon them. Keep the 1947 Act, as Policy Exchange want to do, and the imposition can still occur. But even with the universal development right in freehold, only freeholders will have that freedom, and only those who can raise capital could exercise it. It is a capitalist freedom. But it would mean housing becoming cheap to build again on cheap farmland within a car journey of anywhere there is work. Many of Britain's farmers would simply retire by selling plots of land.

That would explode The City of London's mortgage market, and the capitalist State could never allow that. Which is why Policy Exchange retreat from calling for a Repeal of the 1947 Act, and prefer to raise phantoms of "socialists". You group everyone who is not a disciple of Ayn Rand as a socialist, and make as little sense as Policy Exchange.

In conclusion, Britain faces a huge predicament. An unintended consequence of the 1947 Town and Country Planning Act. I hope you read the paper we have produced.


Ian Abley

The window of opportunity for reform

I read and enjoy your papers and postings. You and I at least are clear about the essentials that 99% of people are not clear about, when it comes to "rent seeking" and devil's alliances between capitalists and politicians/regulators; we use different ideological approaches and terminology, and tend to prefer different solutions.

I, and I believe Alan W. Evans also, do regard the nationalisation of land for urban development (the powers for this exist in the Netherlands, explicitly to try and keep economic rents low) as something that the proponents of urban growth containment SHOULD include in their framework if there is any validity to their concerns about "urban sprawl". They strongly dislike me challenging them, as to whether they are too ignorant to understand whose useful idiots they are, or whether they themselves are corrupt and part of the racket. They do not want to admit to either.

I repeat what I said before: I have encountered numerous people whose credentials as "mainstream" representatives of "labour" could not be doubted, and not one such person I have met so far believes that urban planning harms their constituents or that they have been outsmarted by the "big property" Tories. Henry George would be turning in his grave.

I think that a “culture of freedom” is something that works real socio-economic magic. You say, and I agree:

“……Those with more political influence and the ability to invest their capital will skew the market because all capitalists are in competition. At times that competition is dynamic and advances society, and at others it is moribund or divisive. At worst it is rent-seeking and self-destructive…….”

The “culture of freedom” and the electoral outcomes that result, are what has made the USA such a powerhouse of the “democratisation” of property ownership, amenity, and standard of living. I like to argue that as much as 90% of the people in a typical median-multiple-3 city in the USA, enjoy the kind of amenity that only the top 1% enjoy in London. I mean the size of home, its fitments, its state of “repair”, its proximity to employment, its proximity to reasonable schools and other amenities, the discretionary income left to the household for “mobility” and energy consumption for the sake of comfort; etc.

I say that this is because the “culture of freedom” produces electoral and hence “regulatory” (or rather the minimisation of it) results that ensure that “capitalistic” competition is dynamic and advances society.

It is a great irony that ultimately, the local economies that are based on this culture of freedom, end up a magnet for "producer" industries as well as their workforces. A kind of "virtuous cycle" is produced. You should follow Joel Kotkin's writings on the resurgence of the productive sector in parts of the US economy, if you don't already. Certainly this could all be ruined if rent-seeking and crony capitalism ends up triumphant in those areas as it has in California especially. But the role of "Statism" and "environmentalism" is so glaring that it is hard to see the crony capitalism lurking away underneath. The "culture of freedom" that exists in, say, Texas, gives short shrift to the "Statism" and the environmentalism, and this is what keeps the crony capitalism minimised. It is not that the culture of freedom minimises the crony capitalism and hence Statism and environmentalism do not put in an appearance; the cause and effect runs the other way.

I well understand that the existing mortgage market is like a great monolith in the way of reform. Even the politicians that can be made to understand what numerous benefits there are to competitive urban land markets, remain frozen in fear. What I try to get into them, is that there is a window of opportunity to carry out reforms at the BOTTOM of a property-economic cycle. The boom that would follow would be real and sustainable, and the wholly artificial and destructive "boom" in urban land rents that would have resumed otherwise, would be a thing of the past.

The "culture of freedom" seems to prevent this problem from getting entrenched in the first place; I doubt that it can be "sown" where it does not exist - and hence end up an influence in favour of reform. Pure logic, reason and rationalism needs to be employed - and favourable results are their own argument.

Useful Idiots


Your close attention is greatly appreciated, and our ideological differences are noted. I wouldn't be too self-congratulatory yet though. I may have got this all wrong...

Am I your useful idiot, or are you mine, or are we both idiots for trying to look afresh at what amounts to the age old and unanswered Housing Question?

This isn't a problem of idiocy. It requires more than reason...

I think that what I'm trying to get at with the Housing Trilemma is that it makes sense in Britain for the triangulated interests at work. The outcomes may be insufficient house building, poor quality housing stock, increasing overcrowding, and no doubt, as you say, a diminution of disposable income in the hope of a fund of equity to withdraw from at some future date.

However there is no movement to destabilise that triangle of interests.

A) Social dependence on substantial house price inflation in Britain’s political economy

B) Securitisation of mortgage lending by government through the planning system

C) Public acceptance of the low quality of an ageing and dilapidated housing stock

The predicament has an uneasy stability, but the fund of mortgage lending is secured to that extent.

Events in the wider British economy, or in Europe, or internationally might wobble the Housing Trilemma, but if the economy picks up it will be the basis for more equity withdrawal, more lending, and more of an ageing and inconvenient urban environment requiring constant refurbishment. The City will be secured, and Britain more expensive and quainter.

There is no political constituency wanting to change any of this, either among employees, employers, or the State. Certainly not among the banks. But instead there is a consensus about keeping it all going, as perfectly shown by The Telegraph's "Hands off Our Land" campaign, compatible with Ed Ball's opposition idea for 100,000 homes for rent funded by the sale of 4G licenses.

I wonder what Alan Evans is making of the Policy Exchange report. He worked hard on 3 earlier ones, only to see them retreat from calling for a repeal of the 1947 Act.

Ian Abley