In defence of “Stalinist” housing targets


Housing targets have come under fire again. During the Conservative Party’s leadership election, one candidate described them as “Stalinist”, while another complained about “socialist housing”. A third one described them as “an idea that has been tested to destruction over many years, and it’s time to face the fact that they’ve been a failure everywhere” (which, to me at least, sounds a lot like socialism again).

But it is not just conservatives who are hostile to housing targets. If you are, broadly speaking, of a pro-market persuasion, the word “target” will probably make you wince. The candidates have been widely mocked for their use of the terms “Stalinist” and “socialist”, but it is true that quantitative output targets set by the government are usually a feature of socialist economies, not market economies. And while not every target is automatically “Stalinist”, “Soviet” or “socialist”, target-driven approaches are prone to multiple failures. For a start, government targets reflect political priorities, not consumer demand. They distort production, because meeting a target becomes an end in itself: producers comply with the letter, but not the spirit, of a target-led plan. Targets are authoritarian, because they override the autonomy of local actors, and conflict with local priorities. Perhaps most importantly, even in the best case, targets are usually just arbitrary fantasy numbers. We cannot know what consumers truly want and need, until we can observe the choices they make in an open, competitive market.

This is why, even if you are not especially keen on free markets, you probably would not want an equivalent of housing targets in other sectors. Unless you are a full-on socialist, you probably would not want the government to set “beer targets” for the brewing industry.

Nonetheless, in the current housing policy context, I believe that “Stalinist” housing targets are perfectly defensible as a lesser evil, including – or perhaps especially! – from a free-market perspective. Government output targets, whether for housing of anything else, are obviously very far away from a free-market solution. And yet, our current planning system is so uniquely awful that “Stalinism” represents a relative “liberalisation”. Yes, I mean it. Completely unironically.

In fact, if we organised brewing in the same way we organise housing, I would support “beer targets” too.

Let’s imagine that, as a result of some strange historical accident, we had a system in which, every time a brewery wanted to increase its beer production or broaden its product range, it had to obtain “brewing permission” from a local or regional citizens’ committee. Imagine those committees could, for example, refuse brewing permission for a modern-style IPA if they believe that it would not be in keeping with the character of their region. Or they could block an increase in beer output, on the grounds that this would lead to more lorry traffic, and thereby inconvenience residents.

Let’s also assume that the members of those brewing committees are a heavily self-selected group, consisting almost exclusively of people who are insulated from any adverse effects of curtailed beer production. Say, some of them hate beer and beer drinkers anyway, and actively want to reduce supply. Others are traditionalists, who want to preserve the bitters and milds of the 1970s, and believe the best way to do this is by restricting access to alternatives. Others are homebrewing enthusiasts, who are not affected by what goes on on the beer market.

Whatever the motivation – let’s suppose that the committees constantly get in the way of the brewing business. As a result, per capita beer output is much lower than in comparable countries, and beer becomes a luxury good. Most people are deeply unsatisfied with this situation – there is constant talk of a “beer crisis” – but they are not aware of the causes. The political Left blames greedy brewers, the political Right blames excess demand from beer-loving immigrants. The government tries to mitigate the effects through various demand-side measures, such as the low-interest loan programme “Help To Drink” and pint vouchers for key workers. But nobody wants to take on the brewing committees.

As long as it is deemed politically impossible to abolish the brewing committees, anything which at least constrains their power would be a step in the right direction. Beer targets, which force the brewing committees to accept a higher volume of brewing than they otherwise would, could be one (clumsy) way to achieve this.

We could call such targets “Stalinist”. Stalin, after all, believed in state-imposed production targets, and this would be a state-imposed production target. But the analogy does not really work. The whole point of Stalin’s production targets was to force Soviet citizens to produce and consume things they would not voluntarily have chosen to produce and consume. In our example, we have a very different situation: we have plenty of brewers who want to sell beer, and plenty of beer drinkers who want to buy it from them. Thus, we have a huge potential for mutually beneficial transactions. But those potential gains are not being realised, because a bunch of troublemakers get in the way.

In such a situation, the liberal solution is not to give those troublemakers free rein to tyrannise everyone else. If you want to call centrally imposed targets “Stalinist”, you have to acknowledge that our starting position already represents a Stalinism of sorts: the tyranny of a thousand petty-minded local mini-Stalins. If a more benevolent, growth-focused Stalin limits the power of the Luddite, anti-growth Stalins – good! Glory to Comrade Stalin!

I know that the analogy is not perfect, but there can be no doubt that our planning system gives far too much power to NIMBY obstructionists, who use that power to paralyse the country. As a result, housebuilding numbers in the UK are much lower than in neighbouring countries, and housing costs far higher.

Needless to say, in my ideal system, there would be no housing targets. If I had my way, NIMBY obstructionists would be stripped of their power, and housebuilding levels would be primarily determined by consumer demand. In such a market-driven system, housing targets would not just be unnecessary – they would be a completely alien element.

But in the current system, abolishing housing targets would only strengthen the stranglehold of the NIMBYocracy.

 

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).


8 thoughts on “In defence of “Stalinist” housing targets”

  1. Posted 21/07/2022 at 17:01 | Permalink

    Isn’t there an oligopoly of housing producers? Could that have an impact on supply?

  2. Posted 21/07/2022 at 21:17 | Permalink

    Just love the analogy to brewers who might want to offer customers a new IPA being denied because it broke with the character of the region as determined by the brewing planning committee. So funny. Still hurts as so close to the truth.

  3. Posted 22/07/2022 at 09:24 | Permalink

    Not really Michael Bach. If anything, the reverse is true – the constriction of supply has produced an oligopoly

    If the only way to allow more beer to be made was to submit highly dense, and expensively legalistic documents to the Beer committee, and be prepared to take the Beer committee to the courts over several years, then only the biggest (and blandest, character-free) Beer Corp could afford to take the financial hit to allow more beer to be made.

    Of course, the Beer committee would feel even more emboldened that they’re protecting Beer of unique character, and activists would complain about Beer Corp bullying the Beer committee.
    All the while, beer gets rarer, blander, and more expensive – to the point that it becomes a speculative asset. Rather than something to make life better.

  4. Posted 22/07/2022 at 21:52 | Permalink

    I’d like to see some evidence that NIMBYs are successfully blocking developers. I live in the Chilterns AONB (where one might think it would be relatively easy to prevent inappropriate development) and in our village (pop. ~2,000) a field has been sold for development of a small estate of ~50 houses. I’d say that 80% (if not 90%) of villagers oppose it and the Residents Association (foolishly IMHO) even hired a QC to argue against it. It’s off a single track road with (not enough) passing places and will probably double the traffic along it, and the village school already has insufficient places. Despite all this, the development has been passed and is now nearly complete.

    But we’re ‘lucky’, almost every road around Aylesbury has several new estates either complete or under development, each of a few hundred houses (one literally backs onto what will soon be the track of the lovely HS2!). I doubt the locals were very enthusiastic about any of them.

  5. Posted 22/07/2022 at 23:31 | Permalink

    The term ‘NIMBYocracy’ may be a clever way of making a point, but it doesn’t describe our planning or political system any more accurately than the word ‘democracy’ describes North Korea.
    I am not ashamed to be described as a ‘NIMBY’: it’s just a pejorative term coined by those who want to concrete over the countryside to discredit their opponents. I despair of the fact that the small town in Eastern England that I live in has expanded by more than 25% over the last decade, with a consequent loss of green belt that its residents cherished, and an overwhelming of its infrastructure that has created traffic gridlock and overstretched health and education services.
    But it is also worth questioning some of the assumptions (myths?) that tend to underpin the arguments of those who blame ‘planning red tape’ and ‘NIMBYs’ for the ‘housing crisis’:
    1. The UK is already building houses in huge numbers: the ONS figures show that more than 4 million homes were built in the UK during the first two decades of this century, an average of more than 200,000 per year.
    2. The idea that homelessness is a result of under-supply of housing doesn’t stand up to scrutiny: the charity Crisis estimates that about 200,000 households are homeless; the English housing survey 2018-19 puts second home ownership at 3% of the market (about 772,000 households). So a ‘Stalinist’ solution to that element of the housing problem would be to ban second home ownership and redistribute the property to the homeless, (although ironically, that wouldn’t really be very ‘Stalinist’ because those with power in the Soviet regime usually tended to have dachas in the countryside as well as city accommodation). A more humane and sensible liberal solution would be to disincentivise second home ownership, through taxation, particularly in the countryside and coastal areas where this phenomenon is destroying communities as places are left empty in Winter and on weekdays.
    3. As Ian Mulheirn of the LSE demonstrated a couple of years ago, house price inflation is not a result of under-supply either: from 1996 to 2019, the number of new homes built consistently outstripped the creation of new households. He calculated that there was actually a housing surplus.
    4. The really important (but largely ignored) driver of housing costs is the emergence of ‘buy-to-let’ as the best way of investing spare cash: during 2001-2014, nearly 3 million new homes were built, but the proportion that were private rented grew from 16% to 30%. The proportion that were owner occupied fell from 69% to 63%.
    5. Demand for ‘buy-to let’ is inflated by the most effective (and taxpayer subsidised) marketing campaign in the economy: all those TV programmes made by Public Service Broadcasters that promote investment in property and emphasise the yields to be achieved. It has also been driven by fiscal and monetary policies which make property investment more lucrative than investment in other forms of production; a culture that promotes home ownership as the primary economic goal; the expansion of higher education (how many new homes in most cities are student accommodation?); and the inflationary pressures of quantitative easing and consequent assets bubble.
    6. London property has become the investment of choice for the global rich, making the poorest citizens of the Capital poorer and encouraging internal migration of the lower middle classes out beyond the M25. That is hugely damaging to London’s social fabric, as well as contributing to housing inflation.
    7. House price inflation has been a driver for economic growth: homeowners have borrowed against equity to extend their property, take more expensive holidays, upgrade their cars etc. This has certainly been unfair and increased inequality, but we need to remember that when the asset bubble bursts, whether it’s because we stop printing money, ‘deregulate’ planning or because of a wider economic crisis, people will stop spending. So a house price crash will inevitably reduce GDP growth: we’ve been told that ‘consumer confidence’ is critical for years: if people start to feel nervous about the value of their assets, contraction is inevitable. Nobody advocating the creation of more affordable housing faces up to that fact.
    8. We’ve been told for decades that agriculture is in decline in the UK and that the value of agricultural land should be lower. We’ve also had decades in which the food market has made agricultural production less economically attractive. However, if we’re serious about reducing carbon emissions we need to stop eating Peruvian avocados, Japanese Tofu and Turkish Bulgur wheat, and eat locally grown potatoes, grass-fed beef and British cabbage. The Ukraine war and the pandemic have also shown that food security must be a priority; so we should be conserving agricultural land for sustainable food production, not building over it.
    9. Again, the problem of housing affordability is not a national one: any internet search will identify dozens of homes on the market for less than £100,000. The problem is that we have failed to shift economic activity away from the places in which it is currently concentrated and back to places like Redcar, Rotherham and Rochdale. We could do much more to make it attractive to create decent jobs in the North and other areas that have de-industrialised. Perhaps a really good Prime Minister might recognise that, think of a catchy term for it like ‘levelling-up’, and then be allowed to stay in office long enough to get it done…..
    10. And whilst house prices and big shed prices increase, we have an over-supply of office and retail space in many urban areas; converting that space to housing could increase supply without consuming more green belt.
    The truth is that the political Right has abandoned the sort of traditional conservatism that many of the country’s citizens prefer, and allowed huge swathes of our landscape to be sacrificed to new housing to placate the house-building lobby and to satisfy the demands of a consensus that ‘growth’ is always good, and that we don’t have enough houses. The kind of ‘prosperity’ that is advocated by these voices only serves the rich and fails those who actually appreciate this country’s landscape.
    The planning system is already failing to protect our countryside and also our towns and cities: actual contact with planning professionals in real life will quickly disabuse any sensible person of the misconception that ‘planning’ is stifling development. Quite the opposite is true. And if you want to see where the real power lies, look at how often Planning Committees take decisions that reject the advice of planning professionals (and how often, in such cases, those decisions are allowed to stand when subject to appeal).
    And finally, there’s this: those of us who are concerned about excessive development are citizens of a democracy and we have a right to elect politicians who represent our views and to see them make those views policy. That is the clear lesson of the last 6 years in this country and one that is also demonstrated elsewhere. Perhaps we should be asking why we are the only group that has a dismissive and derogatory label attached to our views: and perhaps we could revive ‘rentier’ as a pejorative term or introduce something like ‘HUTHO’ (for ‘”Homes under the Hammer” opportunist’)?
    And maybe ‘NIMBYocracy’ should be recognised as a synonym for ‘democracy’….

  6. Posted 23/07/2022 at 08:46 | Permalink

    Socialist housing developer here (yes, they do exist). I agree with every single word of this. The whole planning system should be abolished.

  7. Posted 24/07/2022 at 13:59 | Permalink

    But the problem is that there is no shortage of planning permissions for residential development. It is the oligopoly of major housing developers who refuse to build them out for fear of the price of their product dropping.

  8. Posted 27/07/2022 at 06:33 | Permalink

    All very reasonably argued. Unfortunately, it’s yet another piece about housing which steps primly around the actual problem, talking solely about supply and ignoring demand.

    You cannot import over 200,000 people into this country every single year, all of whom need housing, and expect the price of said housing to stabilise. Innovative as we might be, including with Stalinist regulations to counter even more Stalinist planning committees, none of this will touch the sides of the fundamental problem: with uncontrolled immigration the demand is infinite and the supply of land finite.

    England is a beautiful country but if it meant houses for our young people I would sacrifice a large element of it. What’s would be idiotic though would be to destroy ever more of our countryside and overburden our communal facilities just to end up with even more immigration and ever higher house prices. Thus, until hidden subsidies to developers are ended and immigration

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