Housing and Planning

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

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 South East, ‘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 is 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.

This article was originally published by The Conservative Woman.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

12 thoughts on “A simple answer to the housing shortage: Relax the planning strait-jacket”

  1. Posted 29/09/2014 at 20:34 | Permalink

    Kristian – I think you should think again about your assertion that it is currency “nearly impossible to build new homes” because of green belt regulations. In the, currently, modestly-sized town in the south east where I live there are major housing estates being built on three sides of the town on what was green belt land (and very green it was). The problem is that this land has been released for development because the government insists not only on huge additional housing quotas imposed on the council (local people have no say) but planning regulations require that it is all low-rise – very low rise – and therefore it uses land inefficiently. We could fit twice as many, more spacious, homes in these areas if developers could, and were incentivised, to build upwards (I mean medium rise, not high rise).

  2. Posted 30/09/2014 at 10:47 | Permalink

    HJ, we talked about this before. I agree that more medium-rise would make a lot of sense, if only because at least in London, it is already a nuisance that everything is so far away from everything. But higher density developments also create more opposition. You could say that it just shows how stupid the Nimbys are, because on the one hand they want to release as little land as possible (ideally none at all), but then they also insist that if any land is released, only bungalows must be build on it.

  3. Posted 30/09/2014 at 15:19 | Permalink

    Kris, where is you evidence that ‘Nimbys’ insist that only low level housing must be built? I thought this was more down to planning regulations. Local people don’t get much choice in any of this.

  4. Posted 30/09/2014 at 15:59 | Permalink

    HJ – Papers like the Telegraph and the Mail, which constantly rail against development, have also spoken out in favour of bungalows. See http://www.insidehousing.co.uk/home/blogs/bungalow-brandon-lewis/7005239.blog

  5. Posted 30/09/2014 at 16:37 | Permalink

    Kris, I agree with you entirely that their position is absurd. However, my point is that it is not local Nimbys that are the problem, it is the planning regulations.

  6. Posted 30/09/2014 at 17:19 | Permalink

    HJ – That could well be true.

  7. Posted 01/10/2014 at 20:26 | Permalink

    Why not make homeowners pay the full market price for the value they get from State regulation?(This is how a Capitalist economy should function).

    That way, the market sorts it all out. If they like having the Greenbelt, or low rise development in their area, their tax liabilities would be higher.

    Why shouldn’t they get this choice?(Choice=free market capitalism)

    Less tax for the rest of us, so more to spend on buying a home.

    Land Value Tax=puts the full cost of NIMBYISM onto homeowners. It reduces HPs to the cost of construction. The redistributive effects put an extra £11,000 pa into the pockets of the average UK household alone.

    Simply scrapping planning, without de-capitalising land rent first, would make our housing market even more chronically inefficient, and impose welfare and economic costs.

  8. Posted 18/10/2014 at 11:45 | Permalink


    I see your article was originally published in ‘Conservative Woman’.

    and you reverentially refer to one, namely Margaret Thatcher lauding her ‘property owning democracy’ ideal.

    Can you refer to one speech where she said ‘Lets build on the Green Belt’?

    You cant.

    You see the Green Belt not as a beautiful national asset for all but as an obstacle to growth and progress.

    I can almost hear the twang of the puppet strings as you dance to the developers tune.

    You abuse Susan Parker of The Guildford Greenbelt Group on twitter calling her a liar, which she is not.

    And your idea to accomplish this manic profit making growth at all costs ..”Let’s build on the muddy fields, let’s build on undistinguished scrub land, let’s build on intensely farmed agricultural land that is not accessible to the public anyway.”

    What idiocy. So agricultural land that is a national food source should be concreted over forever because it’s farmed intensively or is ‘muddy’ …what claptrap.

    When you next meet your conservative pals Michael Heseltine & David Mellor who are reputedly behind the greedy Cayman Island developers who want to make millions by trashing our countryside in Surrey, let them know that they are responsible for making the Conservative Party unelectable in their previously safest seats in the country.

    At the next election The new Green Belt Party will unseat the friends of developers and put in place Councillors who will protect The Green Belt and bring ethical conduct back to local government.

  9. Posted 15/03/2015 at 12:24 | Permalink

    Hi Kristian,

    Long time reader, first time commenter.

    Quick question: if we build on “intensely farmed land,” will that not cause problems for food supply?

  10. Posted 15/03/2015 at 15:08 | Permalink

    Hi Kollo – there are always lots of potential uses for any given plot of land, not just housing and farming but also retail, office space, industry etc etc. The price mechanism makes sure it gets allocated to the most productive (=the most urgently needed) use. In a country with an oversupply of houses, but a scarcity of farmland, farmers would not find it profitable to sell land to developers: They would earn higher profits by farming the land. The very fact that land allocated for housing is worth a multiple of farmland shows you that we are the opposite: a country with lots of farmland and a housing shortage. So no, it wouldn’t cause problems for food supply. Food can be produced almost anywhere, but housing has to be in specific places. We can transport food, but we cannot transport ourselves (i.e. commute) over hundreds of kilometers on a regular basis. It is nonsense to use land around London for farming. Let people live there, and bring in the food from rural Wales or somewhere.

  11. Posted 15/03/2015 at 15:13 | Permalink

    Thank you for your prompt reply, on a Sunday no less. Very impressive, and I agree with your comment. Your answer is similar to what I thought, it’s nice to hear Caesar confirm my economic understanding.

  12. Posted 15/03/2015 at 15:50 | Permalink

    Kristian, generally speaking:

    I believe in freer markets allocating resources, but how do they overcome the Price of Anarchy: “a concept in economics and game theory that measures how the efficiency of a system degrades due to selfish behavior of its agents (it is a general notion that can be extended to diverse systems and notions of efficiency?” http://en.wikipedia.org/wiki/Price_of_anarchy

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