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 Is it responsible for outdated, “socialist” land planning policies?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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There is a "working" total contrast in culture and politics

I am probably just as cynical about the chances of reform in the UK, as you are. The main substance of what you say just above, could have been written by me. I would happily put my name to it.

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

And there is no movement of this nature in ANY country that does not have a significant political constituency of the "Tea Party" type. Not that I can see so far. Not even in Australia or New Zealand, where there is 30-40 times as much spare land per person as in the UK.

The "culture of freedom" is a preventative. I do not care to name ONE country or State with independence in land policies, that would have a chance of reforming this racket once it has been entrenched. It is far better to never let it start. You would be simply amazed at the total contrast in Texas, to the local political attitudes that so distress you and I regarding Britain and its Commonwealth. Any proposal of regional restrictive urban planning to "contain growth" in a city in Texas would likely result in angry demonstrations at City Hall, local editors and show hosts fulminating against it, and the politicians responsible having "dead" careers from that point.

I see this very much as the "fault" or "to the credit", of the CULTURE, as the case may be. The British, for all their famed pugnacity in WW2, were already by that time suckers for big government, the nanny state, "planning", "social justice" and so on. And like all other people who have lost the "culture of freedom" (defeating Hitler but voting Clement Attlee in means you still don't truly understand freedom) the consequences are fully deserved. The "rent seekers" and crony capitalists could be disempowered at any time if the British actually rediscovered "the culture of freedom". There actually is a Libertarian Party in the UK that would make a pretty good job of this. But does it get 1% of the vote? But what it stands for, is pretty much what your average Texas voter wants in their Mayor, Councillors, Congressmen, Governor, etc etc. The "Democratic Party" in Texas is well to the economic-libertarian Right of the Tories in the UK.

It is not esoteric utopian "communism does work if done right" ideals that means that Texans and most of the rest of Southern and heartland USA have "the right to build" and "affordable housing".

What is a Libertarian?

What is the Libertarian Party in Britain you refer to?

I dread to ask...

You might be interested in this criticism of One Nation Labour.


We are in some serious theoretical trouble here...

Ian Abley

Sean Gabb would sort the UK out if pigs flew

I was thinking of "The Libertarian Alliance"; perhaps they are not a Party that contests elections. But they have the right ideas.

This is classic:

This shows that the Conservatives are certainly not economic Libertarians; in fact they are not even "conservative" on many issues. I applaud Sean Gabb's sentiments, but there is probably even less of a constituency in the UK for economic libertarianism than there is for outright Communism. There is definitely no-one like Sean Gabb who is anywhere near as much of a celebrity as, say, Eric Hobsbawm or Edward Thompson.

But if Mr Sean Gabb lived in parts of the USA, he could well be a mover and shaker in the local Republican Party; certainly in the "Tea Party".

Political miracle the only real solution

"Capitalists" and "Free Marketeers" are two different things. "Capitalists" are more often than not rent-seekers and crony capitalists rather than "free marketeers". The latter tend to be political idealists rather than "capitalists" in the sense of actual business people. Ayn Rand tried in vain to keep the term "capitalism" pure. We need something else to describe what, say, Ron Paul and Thomas Sowell and Randal O'Toole stand for.

And are people like George Soros and the Rockefellers "capitalists" or "socialists" or both? There are good reasons for such people to BE "both". Read "The Paradox of the Statist Business Man" by Theodore Forstmann.

It is no small political miracle that something close to "free market" political ideology prevails anywhere at any time, and minimises "rent seeking" in the economy, in the face of the inexorable devil's alliance between soft and appealing "socialism" and "capitalists". The urban land markets of most cities in Southern USA are a case in point. The intuitions of the voting public down there are admirable, and exceeds those of pretty much the rest of the world. This is ironic given the sneering attitude of the rest of the world to these "redneck, gun-totin', bible-bashin', unsophisticates", of which George W. Bush was the shining example.

Adding 5 more points to the "triangle"

What I want to know from Ian Abley is why, if this is all a "capitalist" conspiracy, there has been no opposition whatsoever to it from the socialists in Britain, who are numerous and who have for quite lengthy periods, had the political power to do something about the urban planning system on behalf of the constituency they claim to represent. Of course Ian and his colleagues are an honourable exception here - but I would like to see him name one single figure from the Labour Party or the Trade Union movement in the UK who has advocated the abolition of the urban planning system. I do not accept that all such people without exception have been perverted by the infiltration of "capitalism" into their institutions; even the "class warfare" purists among them have for decades had nothing to say about the urban planning system and its effect on "the workers".

I agree with the points made about the capitalistic "triangulation" and their consequences. But I suggest there are more than 3 factors, some of which are not capitalistic. I would suggest:

4) The socialists quasi-religious belief in "planning", period.
5) The socialists economic ignorance, leading them to fail to understand how they have been outwitted by "big property" interests. I have corresponded with numerous socialist politicians, and not one of them accepts that urban growth containment inflates the price of urban land. (The exceptions, the cleverest and most radical socialists possibly regard the system as rope sold by the capitalists, which will be used to hang them one day).
6) The love that socialist politicians have for "Statist" solutions. Abolition of the urban land rationing system is a non-starter; government-provided "housing" and subsidies are the natural fit with socialist politicians photo opportunities and press releases.
7) Romanticism about "The Green and Pleasant Land", which in my experience causes softening of the brain in numerous Britons who I would have expected to know better.
8) Misguided assumptions about "food security" and the need to "preserve farmland".

How many factors if not three


We have sought to identify the three primary issues that comprise the Housing Trilemma.

There are lists of negative and intersecting effects that come from the 1947 Town and Country Planning Act as the basis for planning.

If only I was a man of modest independent means I could spend time to investigate my list, your list, and more.

Ian Abley

Old labour, New Labour and Next Labour


There is no one single figure from the Labour Party or the Trade Union movement in Britain who has advocated the abolition of the 1947 Town and Country Planning Act. They all hoped to use it to raise revenues from developers and direct the workforce. For a while that resulted in New Towns and council housing, which were beneficial, and of course still physically exist, though in different tenure, and under changed economic and political circumstances.

The British Labour movement as a reformist party in Parliament has always been in the service of capitalism in Britain, which requires an antithesis between Town and Country to be sustained, once for reasons of manufacturing, now for additional reasons of finance.

The capitalist class has lent a vast fund of capital to the workforce and enjoys a healthy interest return from it. That is why the Housing Trilemma is a predicament for capital. We have nothing to lose but our mortgages...

Ian Abley

The following was published in 1973

Here is a quote from the chapter entitled “Housing Trends and Urban Growth”, in the 1973 Report “The Containment of Urban England” by Peter Hall et al (later Sir Peter Hall).

“………Soaring land prices have perhaps been the largest single influence on the pattern of urban growth in the postwar period, and they certainly represent the biggest single failure of the system of planning introduced with the 1947 Act. The creators of this system believed that they would be successful in nationalizing all development rights in land. The planners may have been inaccurate by a few percentage points in the predictions they accepted for the growth of population, but they were wrong in terms of thousands of percentage points as far as land prices were concerned.

The nationalization of property rights in land was an important part of the whole planning machinery. Cheap land would have made it easier for local authorities to build houses when and where they wanted. It would have made it easier for the land-use planners and private developers to cooperate fruitfully instead of being in a fairly continuous state of conflict. It would have made urban renewal vastly more economic. But when the last vestigial remains of the abortive attempts to nationalize property rights in land were formally removed by the 1959 Act, nothing else was produced as a substitute. The planning system was left to carry on as if nothing had happened.

It is arguable that as a result we have the worst in both public and private worlds. The private world has made the cost of new houses as high, relative to incomes, as they have ever been in Britain's history. The public world, dominated by the planning system, has ensured that most new housing construction has taken place at a density of development which seems anachronistic for an age in which every other household possesses a motor car……..”