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Kristian Niemietz: A simple answer to the housing shortage. Relax the planning strait-jacket

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In a more rational world, planning reform would not be a tribal issue. It would, on the contrary, be an issue around which people from all major political camps could coalesce. Albeit for different reasons, (small-c) conservatives, left-wingers and neoliberal free-market fundamentalists (like the author of this piece) – would be united in their attack on the current planning system.

People on the Left would take issue with the system’s distributional impact. They would point out that by making it nearly impossible to build new homes, the system inflates the property wealth of the well-off, while pushing up rents for low-income workers and lengthening social housing waiting lists.

They would be fiercely opposed to an arrangement which systematically redistributes income and wealth from the less well-off to the better-off. They would realise that allowing housebuilding on a massive scale would do far more to meet their egalitarian aims than inventing new taxes, regulations and income transfers.

In addition, left-wingers would realise that a system that prevents housebuilding exacerbates tensions around immigration, as it turns newcomers into competitors for a fixed supply of housing. They would also realise that the system fuels resentment towards welfare recipients, because when people struggle to pay for their own housing costs, their willingness to shoulder the housing costs of others declines.

In said more rational world, conservatives would also stridently oppose a system which makes Margaret Thatcher’s ideal of a ‘property-owning democracy’ increasingly unreachable, which pushes up household debt and undermines what remains of a savings culture, and which makes more and more people reliant on the state (5.1m households, and counting, receive housing benefit). They would realise how much damage the system does to a lot of the things they value.

A system that turns housing space into a luxury good makes it unnecessarily hard to start a family. Since the problem is worst in the places which offer the best job prospects, the system locks the unemployed and underemployed in places where the opportunities for self-improvement are most limited, crushing any ‘on yer bike’ spirit. More, it undermines trust in our economic and social system as a whole, because it makes a mockery of the ‘do the right thing, and you will be fine’ message. When average rents exceed the net incomes of low-skilled and semi-skilled workers, as is the case in the high-demand cities of the Southeast, ‘doing the right thing’ just won’t get them very far.

In the less rational world that we actually inhabit, things work a bit differently. Even though politicians and political commentators of all stripes are now constantly talking about Britain’s housing affordability crisis, almost none of them are prepared to talk about the planning restrictions that have caused it (least of all the greatly overrated ‘green belts’, a misnomer since most green belt land isn’t actually green). If they mention planning constraints at all, it is to downplay their importance. ‘But it’s not the planning system that’s causing the problem!’, they cry. ‘It’s other things. It’s all those empty homes. Second home ownership. Land banking by corporate developers. Foreign buyers. The Right to Buy. Greedy landlords. Council borrowing caps. Unused brownfield sites. Immigrants.’

The problem with our housing debate is that we are blaming the price escalation on anything under the sun, except the one thing that really causes it. The whole debate revolves around trivial side issues, non-issues, blind alleys and red herrings, and something similar happens in other policy debates about the escalating cost of living as well. In our briefing paper ‘Smoking Out Red Herrings’, my colleague Ryan Bourne and I have dealt with the most high-profile examples, but our list is not exhaustive.

As far as the economics is concerned, the housing issue is settled. The determinants of house prices are an abundantly well-researched topic, and virtually every empirical study ever conducted in this field broadly comes to the same conclusion: land use constraints drive up housing costs. And since the UK imposes some of the most extreme land use constraints in the world, we have ended up with the lowest level of housing supply in Western Europe (measured by residential floor space per household). That is the fundamental issue to be resolved, and everything else is a distraction.

We can have our cake and eat it. Only a tenth of the English surface area is ‘developed’ in the broadest sense. We could easily increase that fraction to, say, a seventh, without even considering sacrificing beautiful natural landscapes. Let’s build on the muddy fields, let’s build on undistinguished scrubland, let’s build on intensely farmed agricultural land that is not accessible to the public anyway.

But before we can get the required policy changes, the terms of the debate have to change fundamentally. For a start, we should stop pretending the countryside was in danger when it isn’t. The ‘concreting over’ of the countryside is a non-existent threat, and we should stop hyping it. And on that note, we should also start using the term ‘countryside’, which has a powerful pull on people’s heartstrings, a bit more intelligently, rather than simply slapping it indiscriminately on all undeveloped land. Perhaps more importantly, we should stop glorifying well-housed anti-housing campaigners as ‘people who stand up for our countryside’. These campaigners are people who have made their pile, and who now use their political muscle to deny the same opportunities to others. They, too, live in houses which were once built on greenfield land, and which could never have been built if previous residents had been as Nimbyist as they are.

The housing crisis can still be solved. The economics of it is relatively straightforward. It is the politics that is a minefield. So be careful when you encounter a cosy ‘solution’ that upsets no one: You, too, have probably been served a red herring.

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Kristian Niemietz
Kristian is a senior research fellow at the Institute of Economic Affairs (IEA). He is the author of the book ‘Redefining the Poverty Debate’.

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