Housing and Planning

Increasing the supply of housing requires less government intervention – not more


Lifestyle Economics
Energy and Environment
The housing crisis is Britain’s most urgent economic and social problem. This is not exactly news, but until serious steps are being undertaken to address it, it cannot be said often enough. In this sense, Shelter’s new report “A vision for social housing. The final report of Shelter’s commission on the future of social housing” is a welcome contribution. As a description of the problem, and of some of its devastating effects on people’s lives, this report is spot on.

Unfortunately, it fails to identify the true causes, which renders it ineffective in developing solutions.

Shelter repeats the conventional wisdom that “the market” simply cannot provide housing. They talk about “a generation of people failed by the market” (p. 183). The market, they claim, can only build luxury homes for the super-rich, but it cannot work for ordinary people. Only the state can do that. Shelter therefore demand a large-scale social housing programme, under which the government, in cooperation with social housing associations, would build over 3m new social housing units over the next two decades.

But Shelter’s own data, in the very same report, casts some suspicion on the “market failure” assertion. Figure 9 (p. 73) shows how much of an international outlier Britain is in terms of house price inflation. In both the US and in (what is now) the eurozone, house prices have only increased about one-and-a-half-fold, after inflation, since 1980. In Japan, they have not increased at all. In Britain, meanwhile, they have increased three-and-a-half-fold (!!) over the same period.

If “the market” is to blame – why do we not see the same problem more or less everywhere? Do all these other countries only have state housing?

Absolutely not. In Britain, social housing accounts for one fifth of the total housing stock. By international standards, that is a very high proportion. Shelter mention social housing in the Netherlands and Austria as positive examples, but fail to mention that these are the only two countries in Europe where the share of social housing is higher than in Britain (with Denmark being about on a par with Britain). In Germany, where house prices have been as flat as a pancake since 1980, social housing only accounts for one in twenty housing units. Switzerland, where house prices have increased at a moderate pace, has almost no social housing at all.

Shelter avoid such comparisons. Instead, they choose pre-Thatcher Britain as their reference point, so that they can peddle the old “residualisation” hypothesis, which blames the privatisation of council housing for the current malaise.

Social housing is a sideshow. If we want to see the levels of housing affordability that we currently see in places like Germany, Switzerland and Japan, we need to make to make it as easy as they do to release new land for development, and to get planning permission for new housing. If we fail to do that, social housing cannot be a solution, because social housing providers will simply be held back by the same planning constraints and the same NIMBY opposition that currently block private development.

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).

1 thought on “Increasing the supply of housing requires less government intervention – not more”

  1. Posted 13/01/2019 at 10:04 | Permalink

    Please visit my website at http://www.campaign-for-change.co.uk ,see Affordable Housing,Care,Election 2019,
    and World War 11 and village life,this one is about history.I am trying to find people in East Sussex to stand in Mays Local Election.Would you be prepared to help support this vision?
    If one purchased a house in the 60s / 70s, one can sell at wt
    hat ever number you like,and move on, but if you are paying out of you wages it’s become almost impossible to do so.I have a plan that would address the housing,Care and Pension issues.
    laurence Keeley.

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