Raising the Roof
22 July 2019
SUGGESTED
Regulation
Monetary Policy
31 July 2019
Economic Theory
25 June 2024
How to solve the United Kingdom's housing crisis
- The United Kingdom’s housing costs are now among the highest on earth, the economic and social impacts severe. Since 1970, the average price of a house has risen four and a half-fold after inflation. No other OECD country has experienced a price increase of this magnitude over this period. London is virtually the most expensive major city in the world for renting or buying a home (per square foot). People often avoid moving to work in productive sectors because nearby housing is too expensive. The proportion of Britons who need financial support for housing is almost unique.
- The 1947 Town and Country Planning Act put land use under unprecedented statutory control, and the resulting regulation has caused at least half the rise in house prices over the last generation. The ‘green belts’ the Act created have grown far beyond what was planned, more than doubling in size since the 1970s, taking in derelict and already developed land, leading to building on more attractive areas. The complex and bureaucratic planning system has favoured big housebuilding corporations over small builders. The resulting identikit estates have helped drive Nimbyism.
- Since the war, government has also centralised taxation. With 95 per cent of tax collected centrally, local authorities have little incentive to allow housebuilding in order to gain additional revenue from new residents.
- National-level taxes drive house prices higher: Stamp Duty hinders downsizing; tax on buy-to-let landlords increases rents; ‘Help to Buy’ has made it harder to buy, inflating demand and pushing up prices.
- Central government control over the housing market was intended to provide homes, preserve an attractive environment, and enhance our cities. It has failed on every count. Radical action is needed to lower housing costs. This means allowing more homes to be built by removing fiscal and regulatory barriers that hinder supply.
- Tax distortions at national level should be reversed; then government can begin the process of tax devolution. For example, Stamp Duty could be cut to 2010 levels, simplified, and then devolved to local government; non-property Inheritance Tax should be cut to the level of property, and Capital Gains Tax reduced on shares; discrimination against buy-to-let landlords should be ended.
- More government land can be used for housing. Reverse Compulsory Purchase Orders – effectively a new Right to Buy – would allow the private sector to demand its sale. In addition, a cabinet minister could be given responsibility for identifying and releasing state land.
- Where green belt land achieves none of its official purposes, it can be selectively re-classified, with a presumed right to development. Most green belt land should remain, however. This proposal should apply in particular to derelict or already-developed sites. Green belt land near transport hubs should be a declassification priority, including Metropolitan Green Belt land within realistic walking distance of a railway station. The amount of green belt land needed is very small: just 3.9 per cent of London’s green belt is needed for one million homes.
- Permitted development rights for individual streets (in cities) or villages would see residents gain from building, as controlling local building lets people demand the styles that research shows they want (instead of tower blocks, for example). Residents of individual streets should have the right to vote to ‘extend or replace’ permitted development rights (for example by increasing the height of houses), subject to a design code they select. Letting urban streets densify and beautify will remove much public opposition to expanding the housing stock.
- Urban local authorities should allow light-touch ‘notification’ to give selfbuilds fast-track planning permission. Residents would build according to a style guide if one were applied by a local authority or street. Style guides created the beauty of Bath and Bloomsbury. There is no reason not to use them once more. No one has a monopoly on beauty, however. Style guides should be optional.
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