Housing and Planning

Optimism Dashed: Reality of housing white paper is all politics, no economics

I should not have let my optimistic side get the better of me. 2016 may be behind us, but its lessons have not fully been learned, particularly by government leaders who still seem to think that big talk is equivalent to big action in the eyes of the public.

Take today’s housing white paper; the hype around its release, as well as the indication from leaks that substantial reforms were on the way, had me very hopeful. The new set of plans was never going to amount to full protectionist upheaval – which will inevitably be needed to fully solve the housing crisis – but it seemed like on both the ‘height and width’ front, the Communities Secretary was serious about increasing supply side, with aims to build in every politically-possible direction.

Alas, today’s paper has been watered down substantially,  earmarking land for only ‘tens of thousands’ of new homes, despite the Secretary’s acknowledgement that 250,000 are needed per annum to keep up with demand.

The bolder elements of planning reform – specifically a rollback of planning regulations and green belt protections – have been omitted from the white paper. According to The Times, the government is instead promising “maximum protections for the green belt” – not because it’s good planning policy – but because of their fear of backlash.

The Government’s unwillingness to take on the NIMBY lobby is going to present major problems to their own white paper policies, which call for forcing local councils to build more homes, as well as downsizing seniors into smaller properties. On the former, the mandate to increase housing supply will inevitably put pressure on the green belt, regardless of ‘maximum protections’, making it likely the council leaders will look for anywhere else to build first, including out-of-the-way locations where people don’t actually want to live, as well as environmentally hazardous brownfield sites. On the latter, downsizing is only desirable when there are alternatives to one’s current accommodation; a problem that can only be solved by building more homes.

Unfortunately, today’s housing announcements do very little to liberalise the planning system or implement measures to bring housing costs down. Building on a mere 0.5% of England’s green belt would fulfil a decade’s worth of housing needs – but even this kind of measured boldness is too much for the government to take on.

Until politicians are willing to tackle Britain’s cost of living crisis in a meaningful way, the IEA will continue to put forward its own prescriptions and solutions.

Below are five key policies taken from the IEA’s Dr Kristian Niemietz’s work on housing, which if implemented, would go a long way to solving the housing crisis and getting costs down for renters and owners alike:

Housing Crisis FINAL

Kate is Associate Director of the IEA. Kate oversees the IEA’s Media Centre and digital platforms, creating and commissioning content for the website, social media, and ieaTV. Kate regularly features across the national media, including appearances on BBC News, Sky News, Channel 4, Channel 5, ITV and BBC’s Question Time.

2 thoughts on “Optimism Dashed: Reality of housing white paper is all politics, no economics”

  1. Posted 08/02/2017 at 19:40 | Permalink

    I love the NIMBY stuff related to Gypsy and Traveller sites…when the Remain influence means no one is racist….really?

  2. Posted 10/02/2017 at 19:24 | Permalink

    Anyone who says the UK has a shortage of housing is misguided at best. Given the fact there are over a million more dwellings than households and 25 million empty bedrooms, it is more likely we have an over supply.

    Economists agree that rent controls are a bad idea because they act as an implicit subsidy to tenants, causing over consumption of housing. Yet this logic isn’t applied to freeholders, who enjoy an implicit subsidy worth over £200bn per year because they do not pay compensation, as tax, for their right to exclude others from valuable locations.

    Not only does this cause excessive vacancy and under occupation, but is then capitalised into rental incomes and thus selling prices. Pushing the average price of a UK home up by two thirds.

    These then act as a transfer payment from those that own relatively little land by value compared to the taxes they currently pay, to those where the opposite is true. Typically from the young/poor to the elderly and the rich. It is this transfer payment that is the cause of affordability issues and excessive individual, inter generational and regional inequality. They are two sides of the same coin.

    While reducing this transfer payment is a noble aim, doing so by building more houses will add billions of pounds of unnecessary extra costs onto our economy.

    It would surely be better to tackle the transfer payment at source with a Land Value Tax. Not only would this be far more effective in reducing selling prices and wealth/income inequality, but it would allow the market to allocate immovable property at optimal efficiency, rationalizing our existing housing and reducing costs. Which at the end of the day all policy proposals should be based on.

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