6. Housing and Planning

Part 6: Housing and Planning - part of The Country That Works For You series ← 5. Health and Social Care · Series index · Next → 7. Fiscal Framework

Housing Is Not a Market Problem. It Is Infrastructure.

Here is the thing most housing debate misses: a house is not just somewhere to sleep. It is labour mobility. It is a child's development. It is whether an older person ends up in hospital. It is whether a family can form in the first place.

The cost of housing failures is paid everywhere except in the housing debate. It is paid in the NHS, in the schools, in the labour market, in the treasury's own benefits bill. Housing is not a sector. It is a substrate. Mess it up and everything built on it wobbles.

We have been messing it up for forty years. The planning system is broken. The ownership structure is concentrated in ways that would embarrass a Gulf state. Local authorities have been stripped of the capacity to build. And successive governments have treated symptoms while the underlying disease grew.

This is what a government that actually wanted to fix housing would do.

The Land Ownership Question

You cannot talk about housing without talking about land. And you cannot talk about land in England without confronting the data on who owns it.

The Who Owns England project has documented what many people sense but few want to say plainly: a very small number of people and institutions own a very large proportion of the country. The aristocracy still holds significant acreage. Major institutional landowners include the Church of England, Oxford and Cambridge colleges, and a handful of property companies whose share registers would not fill a pub car park.

The consequence of this concentration is simple: when planning permission is granted, the value created does not go to the community that granted it or the country that legislated for it. It goes to the landowner. The community builds the infrastructure, funds the services, and absorbs the visual and social impact. The landowner captures the uplift.

This is not a side effect. It is the mechanism.

The planning system, as it operates in practice, is a machine for transferring public value into private land values. Every time a local authority grants planning permission, it is making a gift to the person who happened to own that particular patch of earth. The gift is funded by taxpayers, by the local authority's own infrastructure investment, and by the wider community.

Reforming housing means breaking that machine, or at least putting a significant spoke in it.

Immediate: Now Through End of 2026

Unlock local authority borrowing

The single most immediate lever the government has is borrowing headroom. Local authorities can currently only borrow against their own revenue, which is why so many stopped building decades ago. The Affordable Homes Programme provides grant funding, but grant is not the same as borrowing capacity.

The government should accelerate the use of the Public Works Loan Board to fund council housing starts. This is not new money in the sense ofrequiring Treasury Sign off on new spending: it is unlocking borrowing that local authorities are already empowered to undertake. The PWLB lending terms need to be reviewed to remove the punitive early repayment clauses that put councils off large-scale borrowing. That change alone, made by the Treasury, would unblock billions in construction capacity.

Social housing starts: target the shovel-ready sites

Not all local authorities have the same capacity. The ones that do have capacity, land, and planning consent ready to go should be prioritised now. Identify the top 50 local authorities by housing need and shovel-ready supply. Negotiate direct grant agreements. Set a target of 10,000 council homes started before the end of 2026.

That number sounds small. It is not small. It is the beginning of reversing a decades-long collapse in council housebuilding that dropped from over 100,000 completions a year in the 1960s to fewer than 2,000 in some recent years.

Emergency landlord licensing in high-demand areas

In areas where the private rental sector is the dominant housing type and where tenant exploitation is endemic, emergency licensing regimes should be introduced now. This means mandatory licensing for all private landlords in specified areas, with explicit requirements on property condition, rent increases, and eviction procedures.

The usual objection is that this reduces supply. The evidence does not support that claim. Licensing regimes with proper enforcement improve conditions and do not meaningfully reduce rental availability. What they do is shift the market away from the worst landlords and toward better-managed properties.

End no-fault evictions properly

The Renters' Rights Act 2024 made some progress but retained significant loopholes. The government should close them. Section 21 notices should be abolished entirely and the grounds for possession reformed so that genuine hardship cases can remain in their homes while legitimate landlord cases can proceed through a tribunal without two years of uncertainty.

This is not radical. It is the baseline of a functioning rental market.

Medium-Term: 2027-2028

Planning reform: what Labour gets wrong

The current government's planning reform programme has a fatal flaw: it tries to solve a land ownership problem with a planning process change. Streamlining planning permission does not reduce the value that accrues to landowners when permission is granted. It increases the value of land, which means landowners capture more, not less.

The evidence from the 2020 10,000 Homes Accelerator and various prior "planning liberalisation" initiatives is consistent: planning reform without land value capture does not produce affordable housing. It produces expensive housing with larger margins for developers and landowners.

What genuine reform looks like:

First, land value capture must be built into the planning system at the point of permission. This means the Community Infrastructure Levy needs to be reformed upward, with a new tier specifically targeting the uplift created by residential planning permission. When land goes from agricultural value to residential value, a substantial share of that uplift should return to the community.

Second, local authorities need a land assembly power that actually works. The current compulsory purchase regime is slow, expensive, and legally risky for councils. A reformed CPO process with standardised compensation formulas and faster timetables would allow councils to assemble land at something closer to existing use value, rather than paying a ransom to landowners who have done nothing except hold onto land while the community around it grew.

Third, the brownfield-first requirement needs to be strengthened with teeth. Not guidance, not incentive: a binding presumption that planning permission for greenfield sites will not be granted where brownfield permission exists and has not been implemented. This resets the leverage.

The compulsory purchase question

Compulsory purchase is where planning reform either gets serious or stays performative. The UK has used CPO extensively in the past: for postwar reconstruction, for the motorway network, for urban renewal. It works. It is also politically uncomfortable because it involves the state taking property from private owners.

But the current situation is the inverse of the usual objection. Currently the state is giving private landowners a gift of enormous value through the planning system, and calling that "free market". Compulsory purchase at fair value, deployed to assemble land for council housing, is more interventionist in method but more honest about what is actually happening.

The legal framework is largely there. What is needed is political will and a streamlined process. The Crichel Down rules need to be replaced with something that gives communities a right of first refusal on public land disposals.

Hope value reform: closing the CPO loophole

The most consequential reform to the CPO compensation code is the elimination of "hope value" - and this is where the current system is most systematically abused.

Under the Land Compensation Act 1961 (LCA 1961), s.5 and s.6, when a CPO is made, compensation is assessed at the open market value of the land. But s.14 and associated case law allow landowners to add a "hope value" component - the assessed value of the potential planning permission that the land might receive - even when no planning permission exists or is imminent. The mechanism is this: because the CPO removes the land from the market, the landowner argues, the land should be valued as if it were already developed. In practice, this has meant that landowners adjacent to proposed infrastructure corridors or urban development sites have been able to claim substantial premiums - in some documented cases adding 30–50% to the compensation paid - not for anything they built or invested in, but purely for the expectation of permission that the community's own planning decisions created.

This is not a technicality. It is the mechanism by which landowners extract public money for value they did not create. The September 2025 government consultation on CPO reform proposed precisely to restrict hope value claims to cases where a specific, extant planning permission exists at the time of acquisition - eliminating the speculative component entirely.

Estimated cost impact: Where hope value is currently claimed, restriction to existing use value (EUV) only would reduce per-unit land acquisition costs substantially. For the 100,000 social homes programme - assuming 50,000–70,000 units per year require land assembly via CPO in high-demand areas - the saving is estimated at £50,000–£150,000 per unit where hope value is currently claimed. Across a full programme, this is a reduction of hundreds of millions of pounds per year in public land assembly costs. The legislative vehicle is the Planning and Infrastructure Bill (primary legislation); the reform is consistent with the government's own stated direction of travel.

This reform does not deny fair compensation. Landowners receive open market value for their actual land. What they do not receive is a public subsidy dressed as a market transaction - the uplift created by the community's own planning decisions, infrastructure investment, and presence.

Land value capture: the mechanics

The core mechanism is this: when planning permission is granted, the landowner receives an unearned windfall of enormous scale. The community created that value through its investment, its planning decisions, its infrastructure, its presence. The landowner contributed nothing.

Land value tax has been advocated for decades and consistently opposed by landowners who would pay it. A phased introduction, starting with a higher rate on land held deliberately undeveloped while planning permission exists, would concentrate minds. But more immediately, the existing mechanisms need reform.

The Community Infrastructure Levy should be set at a minimum of 30% of the uplift from agricultural or commercial use value to residential use value, applied at the point of permission. The uplift should be calculated against a standardised land value benchmark, not the actual transacted price, which will already reflect the planning permission.

Revenue should be hypothecated: ring-fenced for council housing construction, not absorbed into the local authority's general fund where it disappears into revenue expenditure.

Community Energy: Housing Plus Renewables Plus Local Authority Ownership

Here is where housing policy intersects with something genuinely transformative.

Local authority owned housing, combined with community energy schemes, combined with a genuine feed-in tariff for solar and battery storage on social housing, is a mechanism for building community wealth rather than extracting it.

The model is straightforward. Council housing departments become energy companies. They install solar panels and battery storage on social housing stock. They sell energy to tenants at below-market rates. They export surplus to the grid and use the revenue to fund maintenance and new construction. The nationalised energy companies, where they still exist in some form, can be required to offer preferential grid access terms to local authority energy schemes.

This is not speculative. There are existing examples: Bristol Energy, Nottingham City Energy, and various housing association schemes have demonstrated the model. The barrier is not technical. It is political: energy companies do not want the competition, and the Treasury does not want to acknowledge that publicly owned utilities can function efficiently.

The benefit for housing is that it makes council housing financially sustainable in a way that has never existed under the current model. A council home that generates income rather than absorbing maintenance costs is a different proposition for local authority balance sheets.

The Housing-Health Link

Cold homes kill. Damp and mould kill. Overcrowding damages child development. These are not metaphors. They are measured, quantified, published outcomes.

The World Health Organization has estimated that cold housing is responsible for a substantial proportion of excess winter deaths in the UK. The links between poor housing conditions and respiratory illness, cardiovascular disease, and mental health deterioration are well established in the literature.

Social housing is, in this context, a health intervention. A hospital ward full of patients whose primary diagnosis is "lives in a cold, damp, overcrowded house" is not a health system problem. It is a housing system problem that the health system is paying to manage.

The connection to Part 5 of this series is direct. Health and social care spending is, in part, housing policy deferred. Every pound not spent on decent social housing is eventually spent on NHS treatment for conditions caused by poor housing.

The specific interventions are well understood: insulation, heating system upgrades, ventilation, mould remediation, and space standards that prevent overcrowding. The Warm Home Discount and the Energy Company Obligation have been the main mechanisms to date. They have not been sufficient.

The energy dimension - fuel poverty, cold homes, and the interaction between housing quality and energy costs - is addressed in Part 3 (Energy). The housing programme and the energy programme are interdependent: you cannot solve cold homes by improving housing quality without also solving energy costs, and you cannot solve energy costs without the energy infrastructure investment described in Part 3. Both programmes should be understood as part of the same social infrastructure investment.

What is needed is a funded programme of social housing stock improvement at scale, with mandatory minimum energy performance standards for all rental properties, social and private, set at EPC C as a minimum by 2028 and EPC A by 2030. The cost of improvement should be borne by landlords, with government grant available to social landlords who can demonstrate they cannot fund improvements from existing rental income.

Landlords who cannot meet the standard should be required to sell to the local authority, with CPO available as the enforcement mechanism for persistent non-compliance. This is both a housing policy and a public health policy.

The Distributional Question

Housing subsidies are among the most regressive in the UK. This needs to be said plainly.

The private rented sector subsidy through Housing Benefit flows to landlords, not tenants. In many cases, the benefit is simply a transfer from the public purse to private property owners, enabling them to charge rents they could not otherwise sustain.

Social housing rents, which are generally set below market rent, benefit existing tenants more than they attract new ones, because access to social housing is rationed by waiting lists. The people who benefit most from below-market social rents are people who have been on the waiting list long enough to get a property. First-time applicants, younger households, and people moving to areas with labour market opportunities are largely shut out.

The distributional fix is not complicated to describe. It requires two things simultaneously.

First, the supply side must expand so that social housing is accessible to people who need it rather than rationed by queue position. This takes time, which is why the immediate actions above matter.

Second, subsidies must follow people, not properties. The Universal Credit housing element should be decoupled from the property in the medium term, with tenants in the private rented sector able to use housing benefit as a deposit and first month's rent payment directly, rather than as a monthly payment to a landlord who may or may not maintain the property.

The worst outcome from any housing policy intervention is that it increases the value of existing property holdings while failing to improve affordability for people who do not already own. The UK has form on this. The Help to Buy scheme, for example, primarily inflated the value of the properties it was meant to help people purchase. Any new policy must be tested against that failure mode.

What This Costs Versus What Inaction Costs

The Treasury will immediately object that this programme is expensive. Let us be precise about what the numbers actually show.

The cost of inaction, to pick just three dimensions:

NHS costs attributable to poor housing: estimated at GBP 1.4 billion per year in treatment costs alone, plus productivity losses. These are conservative figures from the Chartered Institute of Environmental Health.

Welfare costs from housing poverty: the housing element of Universal Credit, the Discretionary Housing Payment top-ups, and the temporary accommodation budget together amount to over GBP 30 billion per year. A substantial proportion of this is a direct consequence of insufficient social housing supply.

Economic inactivity from housing-related barriers: people who cannot take jobs because they cannot find affordable housing in areas with labour demand. The Resolution Foundation has estimated the mobility constraint from housing costs at several billion pounds per year in uncollected tax revenue and elevated benefit expenditure.

The cost of a programme to build 100,000 social homes per year, at roughly GBP 250,000 per home in current construction costs, is GBP 25 billion per year. Against the three figures above, this is not obviously expensive. Against the fact that the UK built over 100,000 council homes per year in some years of the postwar period, it is not historically unprecedented.

One important qualification: the GBP 250,000 figure is the construction cost per unit. Land acquisition in high-demand areas typically adds GBP 50,000 to GBP 150,000 per unit depending on location and whether CPO or market purchase is used. Total programme cost per unit is therefore GBP 300,000 to GBP 400,000 on average across the country. This matters because the housing benefit comparison (GBP 30 billion per year) uses the full cost of the existing housing benefit bill, while the GBP 25 billion figure understates the true unit cost of the new build programme if land acquisition is included. The honest comparison is: the housing programme costs more per unit than the headline figure suggests, but the housing benefit bill it replaces is also larger than the headline comparison suggests, and the net fiscal case still holds. It is important to make this case honestly rather than using the construction cost figure alone.

The fiscal framework within which this sits is the subject of the next post in this series. The short version is that there are credible ways to fund this without breaching the fiscal rules as currently constructed, and the cost of breaching the rules is lower than the cost of continued inaction.

The Construction Capacity Question: From 28,000 to 100,000

The cost of the programme is one constraint. The capacity to build it is another - and this one is serious.

The UK currently completes approximately 28,000 social homes per year. The programme commits to 100,000. Total UK housing completions (all types) are approximately 240,000 per year. Achieving 100,000 social homes therefore requires more than a threefold increase in social housing output - and, given that social housing is a significant fraction of total construction activity, more than a 40% increase in total UK construction output. This does not happen automatically when money is allocated.

The constraint is not primarily money. It is labour, materials, and the structure of the construction industry.

The UK construction workforce is approximately 2.1 million. That sounds large. It is substantially smaller than the 2.3 million employed at the 2008 peak, and structurally different. The workforce that left construction during the post-2008 recession - bricklayers, plasterers, electricians, plumbers - did not all come back. Many emigrated. Many retrained. The industry shed capacity it has not rebuilt.

The SME builder sector - which historically built the majority of UK housing - was decimated by the collapse in small-site development during and after the financial crisis. Volume housebuilders, sensing an opportunity, moved up the value chain and concentrated on large sites with high margins. The result is an industry structure with too few small and medium builders, and with materials supply chains that contracted during the recession and have not fully re-expanded.

Modern methods of construction (MMC) - off-site prefabrication, modular housing - offer genuine potential to increase output faster than traditional build, with shorter build times and less dependence on site-specific skilled trades. But MMC currently represents only a low single-digit percentage of total UK housing output. Scaling it requires certainty of demand (which the 100,000/year programme provides), investment in manufacturing facilities, and a procurement framework that allows local authorities to specify MMC without excessive cost premium.

The realistic trajectory is not a cliff-edge from 28,000 to 100,000. A more honest projection:

Year 1–2: Priority is unlocking shovel-ready sites with existing contractors. Current capacity is sufficient to accelerate starts on approved sites without major supply chain expansion. Target: 40,000–50,000 social homes/year as first phase, using existing supply chains.
Year 3–4: MMC sector scaling begins; apprenticeship completions from expanded programmes start entering the workforce; SME builder support schemes (development finance, pre-planning site assembly funding) begin to rebuild the mid-size builder sector. Target: 70,000–80,000 social homes/year.
Year 5 onwards: Full capacity expansion realised. Target: 100,000 social homes/year.

This trajectory requires that construction capacity expansion is treated as a policy objective in its own right - not left to the market to respond after the programme is announced. Specifically: apprenticeship targets for construction trades should be raised immediately; a national construction skills fund should be established to retrain and recruit workers from adjacent sectors; MMC manufacturers should have access to government-backed development finance to scale capacity before the demand signal alone is sufficient; and the Homes England framework contracts should be reformed to allow faster local authority procurement.

Without this, the 100,000 target is a promise. With it, it is a programme.

What Government Should Actually Do

In summary, in order of urgency:

Unlock PWLB borrowing for councils immediately and identify shovel-ready sites for 10,000 starts before end of 2026.
End section 21 evictions fully and introduce emergency landlord licensing in high-demand areas.
Set mandatory minimum energy performance standards for all rental properties with a funded improvement programme for social landlords.
Reform the Community Infrastructure Levy to capture a minimum of 30% of planning uplift at the point of permission.
Reform CPO rules to allow local authorities to acquire land at existing use value when planning permission exists.
Establish a national local authority energy company framework to enable councils to generate and sell renewable energy to tenants.
Build 100,000 social homes per year as a medium-term target, with a funded programme starting with the most shovel-ready authorities.

The constraints are real. Construction capacity is finite. Planning inspectorates have finite bandwidth. Local authority capacity varies enormously. These constraints are not reasons to do nothing. They are reasons to sequence the actions carefully and start with what can actually be done now.

Forty years of housing failure did not happen because the problem was unsolvable. It happened because the people who benefit from the current arrangement also fund political campaigns and employ very good lobby firms. That is the honest answer to why housing has not been fixed.

Knowing that does not make the policy harder. It makes the politics harder. But the policy itself has been clear for a long time.

Part 6: Housing and Planning - part of The Country That Works For You series

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