Thursday , June 17 2021
Home / Tim Worstall /In which we accuse Liam Halligan of a lack of ambition

In which we accuse Liam Halligan of a lack of ambition

Summary:
Liam Halligan tells us that there are economic rents being made in the housing market: The problem, says Morton, is that planning permissions are “a one-way gift which boosts the value of the land from say £20,000 a hectare to £2-£3 million, in return for no obligation to do anything beyond breaking ground”. As a result, “housebuilding is largely in the hands of a few large builders and a cottage industry of land promoters, pushing up the value of land with permissions and meaning permissions don’t necessarily translate into homes”.Well, yes, something we’ve been saying - at least in part - for a long time now. The granting of planning permission to land increases the value of that land. If we’re unhappy with that bureaucratic apportionment of new wealth then we should do something about

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Liam Halligan tells us that there are economic rents being made in the housing market:

The problem, says Morton, is that planning permissions are “a one-way gift which boosts the value of the land from say £20,000 a hectare to £2-£3 million, in return for no obligation to do anything beyond breaking ground”. As a result, “housebuilding is largely in the hands of a few large builders and a cottage industry of land promoters, pushing up the value of land with permissions and meaning permissions don’t necessarily translate into homes”.

Well, yes, something we’ve been saying - at least in part - for a long time now. The granting of planning permission to land increases the value of that land. If we’re unhappy with that bureaucratic apportionment of new wealth then we should do something about it:

What’s needed is a reversal of the 1961 Land Compensation Act, so when land gets planning permission and valuations surge, often several-hundred-fold, this massive “planning uplift” is shared with local authorities – an idea backed by successive Parliamentary inquiries. That would dampen land speculation, making building plots – and ultimately housing – more affordable. It would also fund new infrastructure as new housing appears, revolutionising the local politics of planning.

That, to us, significantly lacks ambition. For that is the allocation of those economic rents. We prefer the idea of ceasing to create them in the first place. For if they don’t exist then we’ll not get the catfights over who should get them, will we?

The method of destroying those rents is to create a massive oversupply of those planning permissions. Possibly create some 5 million of them - why not 10 million? Or even make it a must issue permission. Some small fee for filing the paperwork to show that a building isn’t going to be put in the middle of the M1 perhaps, but other than that yes, that’s a piece of land, you may build upon it.

We do know, after all, that government issuing many more pieces of paper does bring down the value of each piece of paper - what does anyone think has been done to the money supply over the decades?

We agree, there are political problems with this. But if the price of land with planning permission is a problem then why not just create more of it in order to lower that price? It might even be true, as Halligan complains, that the current large building companies attempt to monopolise those newly created legitimate building plots. But then we know how to deal with monopolies - flood the market with supply.

Or, as we’ve been saying for some time now, don’t change the 1961 Land Compensation Act, just blow up the Town and Country Planning Act 1947 and successors. Job done, problem solved. After all, the only reason for the Planning Act is to stop people building housing folks would like to live in where people would like to live - and why do we want to do that? Why they want to do that to us is obvious but why do we?

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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