Our farmland is unused, so let’s build on it

It is New Year and time to make a resolution. Resolving to eat and drink less will last but a few days; finishing the kitchen and bathroom in the house was what I thought I could manage last year. But the need to earn a living gets in the way of being an amateur builder, when what I really need is cash to pay a proper builder.

But my search for a purposeful resolution is nothing compared with Kate Barker’s. Gordon Brown first asked her to look at housing supply, which she reported on in 2004 and then to look at land supply. She will be looking for a new purpose this year because her second report on land use planning was published in December.

Unfortunately, but perhaps inevitably, Barker’s sequel was an anti-climax. It revealed the same dead hand of an accountant that the first was written in. Barker talks of changes such as removing the need for approval on small housing extensions, or setting up a new body to deal with huge infrastructure projects to speed other applications up. This misses the point. Britain’s housing shortage is not a question of how long a planning application takes to process, it’s a question of there not being enough planning approvals.

In her first report, Delivering Stability: Securing our Future Housing Needs, Barker came up with some recommendations to slow the rate of housing price increase without collapsing the property market. Her suggestions amounted to no more than tinkering and a call for a slight increase in housing output. Since then the price of a home has risen faster than the general rate of inflation, and particularly wages, offering an outlet for abundant speculative investment.

In that report, Barker gave impetus to all the tedious talk of Modern Methods of Construction and offered this as a way of building more homes more cheaply. This is nonsense.

When brick and block can be built to meet building regulations for £800/m2 there is no point in spending more on MMC. The only reason to consider MMC is when the site is too cramped to build easily with a good value technology, when the cost of construction must increase.

Barker believes that higher density housing and mmc is the solution. It’s actually part of the problem

This often happens when the price of land and planning policy forces development into a topology of more than 30 homes a hectare. Such homes are usually contrived and diminutive, but will sell before they are built in this buoyant market.

While Barker believes that higher density housing and MMC is the solution, it has actually become part of the problem by pushing land prices higher and higher. With more than 25m homes in Britain “worth”, on average, £200,000, the total value of the 70% in owner occupation exceeds £3.5 trillion, with £1 trillion of that secured against mortgage debt. If an average British home of 100m2 costs £800/m2 to build conventionally, then £120,000 attaches to the plot of land. That means that every hectare of developed land, with its 30 homes, is worth an average £3.6m, although obviously this varies wildly due to location.

So Barker looked at land supply, but what she should have considered was the point of planning. Government invented planning in 1947 to direct resources towards housing production, but in 2007 it uses it to maintain an artificial shortage of land for development.

It will be disastrous if planning is handed to an unelected body of appointees like Barker as an instrument of a Treasury desperate to sustain property market speculation, regardless of wages.

If we really want enough, affordable housing, we must look to the abundant farmland outside of Britain’s areas of outstanding natural beauty. I’m not talking about the best, most valued farmland, but all that space languishing on set-aside, or some environmental scheme. These farmers cannot resolve to sell their land to a developer this year.

In October Barker’s boss Mervyn King, governor of the Bank of England, warned that interest rates would rise if workers pushed for wage increases. But with average homes, where not completely unaffordable, running at five or six times average salaries, the gap has to be closed. Either wages go up, or the premium on housing must fall. To recover the productive point of planning – now there’s a resolution.