Housing and Planning

Britain’s housing crisis is uniquely severe – but it is solvable


On Monday, Jacob Rees-Mogg and I released Raising the Roof: How to solve the United Kingdom’s housing crisis. This new IEA paper will feature in a book of the same title, including the winning essays for the Koch Prize 2018. The prize asked entrants to offer free market solutions to the UK’s housing crisis.

This housing crisis is uniquely severe. Our housing costs are among the highest anywhere: since 1970, the average price of a house has risen four and a half-fold after inflation, beyond any other OECD country. The capital is almost the most expensive major city in the world to buy a home; young people will often avoid moving to work in more productive sectors because nearby housing is too expensive. The proportion of people needing housing benefit is also almost unique.

Raising the Roof suggests that Britain’s unrivalled inability to build houses, and its unique centralisation, is no coincidence (it is important to note that this creates many other pathologies). But in particular, we are concerned with the centralisation of the planning system, and of tax.

Having expanded during the War, central government has considerably restricted the supply of land for housebuilding. The most drastic step in this direction was the 1947 Town and Country Planning Act. Although green belts of some sort had existed since the 1930s, this launched the concept on a grand scale. Green belts have since grown far beyond what was first planned, more than doubling since the 1970s, for example. They now take in derelict and already-developed land, causing building in more attractive places.

Government also created our centralised tax system: with 95% of tax collected centrally, local governments see a reduced incentive to allow housebuilding, gaining relatively little additional revenue from new residents while facing initial administrative cost. The adversarial, complex planning system that has resulted favours large incumbent housebuilders; the identikit estates that have arisen are a major cause of Nimbyism, making the housing crisis worse.

So the state “effectively nationalised land use rights”: but its planners went further, deciding in the post-war years to design housing itself. We propose that there are few better examples than the tower blocks that resulted of why markets and choice work better than state planning, and of the cruelty that results from our failure to observe this.

As the historian David Kynaston has described, petitions against these buildings, such as from 11,500 citizens in Bristol, were ignored. When the BBC in 1961 investigated growing depression within these estates, a GP complained of the ‘excessive demands for his services’ among residents. A correspondent noted: ‘There are, of course, social objections to compelling families with young children to live in high flats’, but this was not allowed to intrude on ‘integral plans’. One Marxist sociologist decided that ‘the success of the new tall blocks suggests that the traditional attitude is not permanent’.

In response to the housing crisis, the paper proposes a four-point plan. The first is cutting and decentralising tax. Here, tax distortions at national level can be reversed. Stamp Duty can be cut to 2010 levels and devolved, and distortions that inflate demand addressed: non-property Inheritance Tax can be cut to the level of property, Capital Gains Tax cut on shares.

Second, a new Right to Buy, where Reverse Compulsory Purchase Orders would allow the private sector to demand the sale of areas of government-owned land, with a cabinet minister responsible for identifying and releasing them.

Third, making the green belt do its job. Where green belt does not achieve its purposes, it can be re-classified with a presumed right to development. This would not impact most of the green belt, but would apply especially to derelict or already-developed sites. Only 3.9 per cent of London’s green belt would allow one million homes.

And fourth, choice not bureaucracy: freeing the market in beauty. Permitted development rights for individual streets or villages would let residents extend or replace (up to a number of storeys), then gain from building: local control creates a homeowner profit-incentive and lets people demand styles they actually want. Half the capital’s homes are in buildings of one to two floors. Over time, we could see five million more homes in London alone. Urban local authorities should also give self-builds fast-track planning permission.

Failure to solve our housing crisis may put our property-owning democracy itself under threat, the young essentially priced out of it. Not for the first time, the state’s unchecked growth has put our freedoms at risk. Hayek, however, should have the last word on why such decisions should not rest with the central planner:

[The] knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. The economic problem of society is thus not merely a problem of how to allocate ‘given’ resources — if ‘given’ is taken to mean given to a single mind which deliberately solves the problem set by these ‘data.’ It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.

 

Senior Research Analyst, Trade and International Competition Unit

Dr Radomir Tylecote is a Fellow of the Institute of Economic Affairs and was a member of the IEA’s International Trade and Competition Unit (ITCU) during the Brexit years. He is Director of Defence and Security for Democracy (DSD) at the think tank Civitas. He has a PhD from Imperial College Business School and an MPhil from Cambridge University and is frequently published in the UK press including The Telegraph and the Mail.


4 thoughts on “Britain’s housing crisis is uniquely severe – but it is solvable”

  1. Posted 29/07/2019 at 12:52 | Permalink

    What might you be writing in 50 years time? Build yet more houses? I can’t remember ever reading, in this type of article, any mention of a maximum number of people which can comfortably inhabit this country, or what we should do as we approach this number, currently at the rate of 500,000 people a year, or 250,000 new houses. What the number is, is a matter of opinion, but there is one, and eventually you will need to address the question.

  2. Posted 31/07/2019 at 01:24 | Permalink

    If housing (land) is expensive, then why not use it as tax revenues? This allows for the reduction/emanation of taxes on beneficial activities, thus optimising the economy for growth. It also solves affordability issues, instantly and permanently, because it drops land’s selling price to zero by transferring incomes back to those that find housing unaffordable now.

    If we allow one group in society the privilege of harming another with paying them compensation, that’s bad for society and its economy. Blaming planning for the symptoms this causes is either misinformed or dishonest.

  3. Posted 03/08/2019 at 20:39 | Permalink

    What we really need is the intensive re-generation of Town Centres, where many people need and want to live but cannot. You do not need cars if you live in town centres, you are less likely to become socially isolated and services are more readily available. London has done a great deal to regenerate its older housing stock and people find the properties more than acceptable and leading to social harmony. Building houses in ribbons adjacent to roads on the edge of town mean urban sprawl, congestion from more car journeys and problems for everyone. I know. I made the mistake of renting on an estate in a village with one bus an hour and very little in the way of services: and NO mobile phone connection! Which has big add-on problems. As I am renting I am fortunate. I can move back into town and shop, have meet ups with my friends, perhaps even go to the cinema occasionally ? Regenerate, do not build the slums of tomorrow.

  4. Posted 10/08/2019 at 09:49 | Permalink

    As ever, Tylecote’s “solutions” will benefit only the wealthy; if his plans are implemented they may increase supply of homes for the wealthy. It’s impossible for Tylecote to propose solutions that challenge the insanity of the housing market because, even if, by some miracle of independent thought, he attempted some challenge, he will be prevented by his paymasters.

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