Don’t count on brownfield: It won’t solve the housing crisis alone
IN TODAY’S Mansion House speech, George Osborne is expected to outline new plans to encourage housing development on brownfield sites. The speech follows in the wake of an IMF report, which urged the UK government to relax planning rules that constrain both brownfield and greenfield development in order to sort out the grave imbalances in the housing market. Unfortunately, whatever brownfield incentives Osborne outlines today, they are unlikely to be enough.
Britain’s housing market imbalances have been building for a long time. By international standards, British housing construction levels have been extremely low for over three decades, with only between 30 and 40 new housing units built for every 10,000 inhabitants per year. But after 2007, construction fell to a new low, even for the UK. And while aggregate figures are returning to their inadequate pre-recession levels, this masks an ongoing near-standstill in areas where demand is highest.
The general problem in housing is that there is almost no overlap between the economically sensible and the politically palatable. Virtually every study on the determinants of house prices that has ever been conducted concludes that inflexible planning restrictions, especially growth boundaries like greenbelts, are key price drivers; but those blanket development bans are also protected by well-coordinated vested interests, to which the government does not dare stand up. This is where brownfield sites come in. Unlike greenfield land, brownfield land has few organised defenders. Could we simply bypass the Nimby lobby by unlocking the potential of these sites?
At its best, brownfield redevelopment can be a win-win situation. Derelict industrial sites can have negative knock-on effects on their surrounding areas, in which case redevelopment would not just increase housing supply but also remove a source of blight. They are often within or close to existing settlements, and thus connected to an existing infrastructure network. And yet brownfield redevelopment is being held back. Decontamination can be a legal minefield, involving unpredictable long-term liabilities for developers. Decontamination costs are partially tax-deductible, but the tax situation is so complex that developers cannot readily assess to what extent they will be able to make use of those options. If Osborne’s plans can address some of those issues, they will make a positive contribution to the housing situation.
But we should not exaggerate the potential for brownfield site redevelopment. It can be a sensible complement, but it cannot be a substitute for a wider liberalisation of the planning system. We need a lot more housing on both brownfield and greenfield land. Let’s have a look at the numbers.
The Department for Communities and Local Government estimates that, if every square inch of redevelopable brownfield land was used for housing, it would be enough to fit 1.5m new homes. The figures are not perfectly reliable and are subject to frequent revisions, with previous estimates indicating much smaller numbers. But let’s give the highest estimate the benefit of the doubt. How should that figure be interpreted?
First, not every development that is physically possible is also economically viable. For some of those sites, decontamination costs will, for the time being, be prohibitively high. Greater legal certainty could make those costs more predictable and insurable, but they still have to be incurred, of course. Secondly, not all of these sites are in places where people want to live. Less than a third of the brownfield land area is in London and the South East, and even this is still a very high level of aggregation. Thirdly, the 1.5m figure is based on the size of recently developed dwellings, which are the smallest that can be found anywhere in Europe. If we allowed for just a little bit more space and comfort, the numbers would dwindle. Fourth, development is already heavily biased in favour of brownfield sites, with a brownfield-to-greenfield ratio of 2:1.
So, yes, of course we should make the best possible use of previously developed land. But we should not pretend there is a limitless supply of such land in the right places. If brownfield redevelopment was really such an obvious no-brainer, developers would have snatched up that profit opportunity long ago.
What the whole discussion really shows us is the inadequacy of rigid, bureaucratic forms of land categorisation. An ex-industrial site that is used as a car park is not really “derelict”, and greenbelt land that is used for high-intensity agriculture is hardly pristine countryside. We should judge land by its actual environmental and amenity value, not by a box-ticking template from the 1940s.
Dr Kristian Niemietz is a senior research fellow at the Institute of Economic Affairs. @K_Niemietz