Earlier this week, Californian lawmaker Kevin Faulconer outlined an ambitious overhaul of the city’s planning system. He tweeted:
“Government can’t build its way out of the housing crisis. We need to get government out of the way – so constructing homes becomes easier, less expensive and faster.”
Faulconer and his team propose removing height and density limits from the planning system, and promise to streamline development, allowing much-needed projects to be built without the usual reviews and permissions.
To free-marketeers following the UK housing debate, his arguments read like manna from heaven.
The Labour Party, unsurprisingly, tends to focus on government-built ‘affordable’ and Council housing, rather than taking a supply side view and considering the systemic obstacles to increasing housing stock overall.
The Conservatives, too, have long favoured inflationary demand-side policies like Help to Buy or else relatively slight and ineffective tweaks. In her Party Conference speech last year, the Prime Minister vowed to kick-start a council housing revolution by lifting a cap on local authorities’ borrowing. That is not to say that all of these are terrible ideas, but the statism and general lack of radical thinking does suggest that British politicians have lost faith in the market – and ‘Econ 101’ – to deliver housing.
“Teach a parrot to say ‘Supply and Demand’ and you’ve got yourself an economist”, in Thomas Carlyle’s (probably apocryphal) words. You certainly don’t need to be an economist to grasp that today, Carlyle’s parrot would be urging us to build more houses. But what would he have made of recent action on housing?
Polly might welcome increased housing stock of any kind. But if strictly wedded to the laws of supply and demand, she would probably prefer policies that enabled more and cheaper homes to be built in the long run, rather than measures dependent on government borrowing.
Since government-imposed legislation is largely responsible for the housing crisis in the first place, how ironic that many favour statist solutions. Britain’s onerous planning laws (the most restrictive in the OECD) not only protect rural land, preventing development in arbitrarily-defined ‘Green Belt’ areas, but make urban redevelopment costly and complex.
By demonising developers and propagating a view that “Right to Buy” has decimated Britain’s social housing stock, a new consensus has emerged, insisting “we cannot trust the private sector to deliver the housing we need – so the state must intervene.”
In reality, Britain has the third highest rate of social housing in Europe. On the continent, private sector house-building is very much the norm – as it once was here. In 1934-35, before Green Belt restrictions, the private sector built almost 300,000 houses a year, with a much smaller population.
As Kristian Niemietz has outlined, most common complaints about housing are driven by the same lack of supply. In the social sector, this means additional demand for state housing, the last chance saloon for tenants with no other option. In the private rental sector, the problem creates soaring rents and “rogue landlords”. Would-be homeowners struggle to access housing finance and raise capital for deposits.
For all the talk of social housing, there is arguably no specific shortage in any one area, but an overall lack of affordable housing across all tenures. To fix this, we don’t need separate policy measures for specific sub-sectors, but an overall increase in housing supply across the board.
Loosening planning restrictions is by far the easiest and cheapest way of achieving this. Yet rather than embrace the power of the market through planning liberalisation, politicians of all stripes have accepted a dirigiste narrative which requires house-building to be performed by government. The Mayor of San Diego’s recent pronouncements give us a taste of what has been sorely lacking in the debate.
State-sponsored housing may address supply in the short term, but anything which fails to reduce systemic obstacles to building will be less Carlyle’s parrot, more Dead Parrot.