Economic Theory

Classics revisited: “NIMBYism: The Disease And The Cure” by Richard Ehrman (1990)

I recently reviewed a book on this blog which I had first read a quarter-century earlier: Globalisierung by Helmut Schmidt, the former West German Chancellor. I did that because I found it remarkable how, even though 1998 is not exactly ancient history (I still have at least one shirt which I already used to wear in 1998), the books nonetheless feels like it was written in a very different era. This is simply because globalisation is an area in which a lot has happened in the meantime. You would immediately notice, even if you didn’t know, that this book was not written yesterday.

I had the exact opposite experience this week when I read the booklet NIMBYism: The Disease And The Cure by Richard Ehrman, first published by the Centre for Policy Studies in 1990. Unlike Schmidt’s book, it is peppered with references to the politics of its day, but it still feels like it was written yesterday. A booklet which talks about the European Single Market, the opening of the Channel Tunnel, and German Reunification, in the future tense, should feel slightly outdated. But it’s a booklet about NIMBYism, so it very much doesn’t. Because this is an area in which nothing of substance ever changes.

The only passages that feel a little quaint to a present-day reader are those that explain why Britain’s lack of housebuilding is a problem, rather than treating it as too obvious to merit an explanation. Ehrman also talks about Britain’s housing crisis in terms which, nowadays, would sound like massive understatements. It imposes “costs […] that are now beginning to affect the wider economy”, which is why “an increasing number of observers are beginning to wonder whether the disadvantages of expensive housing are not beginning to outweigh its advantages”.

But it would not take much work to write a revised edition.

Ehrman’s central thesis is easily summarised: the Town and Country Planning Act 1947 created a planning system which was meant to mediate between the interests of different groups, and make economic activity more coordinated. In practice, though, “the system soon […] began to work for those already established in a place, rather than for those who might want to move there.” The result was a slowdown in the building of housing, infrastructure, and other things on which the country’s prosperity depends.

Ehrman points out that Britain’s high cost of housing is not just a problem in its own right, in that it directly reduces people’s living standards. It also creates a whole range of second-order problems. One of them is macroeconomic instability. It was already true in the late 1980s that the British economy was unusually reliant on house prices, because housing wealth played a much greater role in the average person’s finances than it did in e.g. France or West Germany. Housing wealth, however, is volatile, so an economy which is reliant on it will be more volatile than an economy which is not.

One and a half decades later, this point would resurface in the Barker Review of Housing Supply. Barker showed that in Britain, the correlation between private consumption and house price inflation was stronger than anywhere else in the EU: a correlation coefficient of 0.85 (on a scale from 0 to 1), compared to a European average of 0.56, a French coefficient of 0.50, and a German one of 0.33.

Further, Ehrman argues that house price inflation is not a symmetric problem. It has the effect of “keeping people out of the South East”, i.e. trapping them in low-productivity regions, and strangling growth in the most productive parts of the country. This problem is many times greater today, as we can see from the spread in Housing Affordability Ratios – the ratio of median house prices to median gross annual earnings. In 1997 (the first year for which we have data), that ratio ranged from a little under 3 in in the most affordable parts of the country to a little over 6 in the least affordable ones (extreme outliers aside). Today, it ranges from a little under 5 to well over 10. So housing has become less affordable everywhere, but nowhere more so than in the regions that were already least affordable in the 1990s.

Ehrman goes on to argue that, at the sharp end, NIMBYism causes homelessness. Again, this suspicion was later strengthened in the Barker Review, which showed that if we break it down by region, there is a strong correlation between homelessness rates and housing costs – both over time and between regions.

Ehrman accepts that new development is often ugly, and that this reinforces NIMBYism. But he believes that the causality runs both ways. NIMBYism raises the cost of land. Housebuilders then need to cut costs elsewhere, and beauty is optional. So it is a vicious cycle, where NIMBYism leads to uglier housing, and uglier housing then leads to more entrenched NIMBYism.

On the solutions side, Ehrman already discusses most of the proposals that we are still arguing about today: build on “the grubbier parts of the Green Belts”, release public sector land, revive the New Towns programme, and introduce financial compensation mechanisms so that local residents benefit from development. Thus, not only was the problem already well understood 33 years ago: the solutions were already there too. We could have sorted this all out ages ago.

There should be a German word for “that depressing feeling you get from reading an old publication which ends on an optimistic note, when you, the reader with the benefit of hindsight, know exactly how wholly unwarranted that optimism was”. That, in any case, is how I felt after I finished reading. Ehrman believed that “[t]he Conservative Party cannot dodge the issue for ever”: simpler, more innocent times.

I’ll leave you with what is, with the curse of hindsight, the most depressing concluding remark I have read in a while:

“Perhaps joining the exchange rate mechanism of the European Monetary system may finally prove the catalyst. If we are to enter a system designed to force our inflation rate down to that of Germany, then we soon will no longer be able to afford the self indulgence of nimbyism.”



Recommended reading:


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).

2 thoughts on “Classics revisited: “NIMBYism: The Disease And The Cure” by Richard Ehrman (1990)”

  1. Posted 28/09/2023 at 20:56 | Permalink

    By golly, that last paragraph pierces the soul nay the essence of what we understand humanity to be about: for thousands of years those who wanted their grandchildren to get ahead won the genetic competition and the people with schit genes or who were indifferent to their grandchildren doing well died out.
    Not now amigo.

  2. Posted 14/11/2023 at 12:32 | Permalink

    Thanks for your interesting article.

    Regarding NIMBY – it’s a misnomer, isn’t it? Nobody’s forced to build in “my” back yard. The term implies property rights that apply beyond your fence…it’s not yours at all, if it was “yours” then you would have market forces at your disposal.

    Perhaps more importantly, you’re right about beauty and cost. But you also speak to the non-price effect of barriers to development. Small developers with local roots who have obvious incentives to build higher-quality / vernacular housing that “fits” can’t cope with the planning process. Nobody has a stronger incentive to build a decent house than the neighbour-developer. Meanwhile homebuyers are desperate – they struggle to exercise choice and demand high quality, when they have so few options.

    The whole set-up plays to giant housebuilders, investing heavily in consulting and appeal processes, able to go several rounds over several years with local opposition – and then ultimately able to sell ugly, poorly-built homes that aren’t loved by either the buyer or the neighbour.

    The Labour Party is about to campaign on an authoritarian solution – we’ll get some national housebuilding consortium which either be another gift to giant crony homebuilders, or a socialist shower. The shires will get huge housing estates and new towns irrespective of market needs, and located squarely in “conservative areas” for political benefit. The irony being we really will end up with “concreting the countryside”. Absent any effective Conservative response, the Labour Party policy will be popular in 2024. Conservatives just about have time to unveil a bottom-up response that instead empowers small developers and homebuyers.

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