Housing and Planning

Why cutting immigration is not a substitute for reforming the housing market

In his 2008 book An Appeal to Reason: A Cool Look at Global Warming, the late Nigel Lawson presented a persuasive argument for why adaptation trumps mitigation when it comes to dealing with climate change.

Adaptation, according to Lawson, is a more robust strategy, because it makes sense under a broad range of scenarios, whereas mitigation would only work under fairly specific conditions. Adaptation does not require us to do anything fundamentally new, or different. It just requires us to do more of some of the things we already do, and were already doing before climate change. Building flood protections, for example, makes sense anyway, with or without climate change. Not even Greta Thunberg, Roger Hallam or George Monbiot would claim that if we stopped emitting CO2 today, there would never be a flood again anywhere. The argument is not that climate change is the sole cause of flooding; it is that climate change makes flooding more frequent and/or more severe. Thus, climate change requires us to ramp up investment in flood protection, but this is an incremental change, which builds on what we already do. A similar logic applies in many other areas, such as dealing with heatwaves, or changes in farming practices.

Decarbonisation, on the other hand, only helps if it works as intended, and if the rest of the world cooperates. We could pump a huge amount of resources into decarbonisation, and then still be left vulnerable to natural disasters.

This logic obviously has its limits, and even Lawson did not suggest that this was the whole story. But his broad point stands: policies that work under many different scenarios trump policies that rely on very specific conditions to work.

I am sometimes reminded of Lawson’s argument when I read conservative knee-jerk responses to Britain’s housing crisis. Every time I write something on how NIMBYism is destroying the country, the comment section, and my Twitter notifications, fill up with replies like “We don’t have a housing crisis – we have an overpopulation crisis!”, “Why should we build houses for foreigners?”, “Funny how you’re completely neglecting the demand side! Aren’t you supposed to be an economist??”, etc.

The people who make those claims are not necessarily out-and-out NIMBYs. They are not against housebuilding per se. They just see reducing immigration as a much bigger priority, and unless that is sorted out, they are not really prepared to talk about anything else.

I believe that these people are profoundly mistaken.

Defeating NIMBYism, and liberalising the supply side of the housing market, is a robust strategy in the “Lawsonite” sense: it would work under a broad range of scenarios. It is what we should be doing in a high-immigration scenario; it is what we should be doing in a low-immigration scenario, and it is what we should be doing in any intermediate scenario. In fact, I struggle to think of any scenario in which this would be a bad idea, other than perhaps the prospect of an alien invasion by aliens which are known to be attracted by built-up areas. (And even in that scenario, we would still need to defeat NIMBYism, because otherwise, the likes of Theresa Villiers and Bob Seely would block the installation of anti-alien-spacecraft defence missiles.)

YIMBYs are often somewhat reluctant to talk about the role of immigration in the housing market, because they believe that once you concede that immigration is a factor, people will just use that to blame foreigners, and let NIMBYs off the hook. Economics, however, is an unsentimental discipline. From an economic perspective, it is obviously correct that in a market where supply is largely fixed, anything which increases demand must increase prices. Since the British housing market very much is such a market, and since immigration does increase demand, it logically follows that immigration must push up housing costs. It is therefore unsurprising that the empirical evidence confirms the existence of this effect, even though there is a lot of disagreement about its magnitude (see pp. 68-70).

But what the empirical evidence also shows is that cutting immigration could not be a substitute for reforming the housing market. One estimate, at the higher end of the spectrum, suggests that over the quarter-century from 1991 to 2016, immigration increased real house prices by about a fifth. That is a lot. But we are talking about a period in which house prices more than doubled in real terms, so there is obviously a lot more than that going on.

(Note, also, that this refers to the total effect of immigration. Proponents of tighter immigration controls are usually not saying that immigration should be zero – just that it should be a lot less than now.)

Even if net migration dropped to zero tomorrow, and then stayed there, there would still be a need to build millions of homes. We would be adding less to future demand, but we would still have to deal with the excess demand we already have, and future additions to it that are driven by homegrown factors.

Now, maybe there is a kind of planning reform that would enable us to build just enough houses to cope with domestically driven housing demand, but not with any additions to it. Yet I’d struggle to think what such a reform would look like, in practice. Planning reforms are not precision instruments. They are blunt tools. You try to make the supply side more responsive, and then see what happens.

Thus, there is no logical reason why the pro-open-borders YIMBY and the anti-immigration conservative should not converge on a similar position when it comes to reforming the housing market. They would, of course, still disagree on immigration – which is fine. The open-borders YIMBY may see planning reform as a standalone policy; the anti-immigration conservative may see it as a natural complement to cutting immigration.

But that does not have to make them opponents. If I see policies X and Y as natural complements, whereas you are a single-issue campaigner for X who has no interest in Y, I’m not going to see you as my enemy. I’ll be happy that we agree on X, and I’ll gladly support your pro-X campaign, rather than attack you for not also agreeing with me on Y. I’ll see you as a partial ally, and I’ll work with you on X, while still continuing to make the case for Y elsewhere.

That is how anti-immigration conservatives should see pro-housing YIMBYs.


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).

4 thoughts on “Why cutting immigration is not a substitute for reforming the housing market”

  1. Posted 16/05/2023 at 17:41 | Permalink

    No Kristian the reason you always get protests from the anti-immigration folks (of whom I am one) when writing about housing is that you never mention it yourself. We all understand that there are many contributing factors, but it is you who left an important one out.

  2. Posted 17/05/2023 at 11:11 | Permalink

    @Rhoda: OK, let’s say, the Campaign for Real Ale campaigns for a cut in beer duty. Let’s assume that you support that, but you also think it’s not specifically beer duty that is the problem, but alcohol taxation more generally.
    What do you do? Do you:
    a.) support them in their campaign, while also, in parallel, supporting some other campaign for reforming other alcohol duties? Or do you
    b.) attack them for not also agreeing with you on wine duty and spirits duty?

  3. Posted 18/05/2023 at 09:56 | Permalink

    False dichotomy there. If I am the CAMRA man, my problem is the beer duty, the other is some other guy’s problem. If I am concerned about housing the problem is not properly defined by talking about ‘the housing crisis’ as if it was one problem, itself rarely ever defined. However, it is no use dealing with a supply/demand issue by addressing supply in a limited manner ( remove planning restrictions and run straight into the next bottleneck, be it labour, materials, whatever) without all the other factors such as immigration, divorce-based changes of requirements, actual concerns about over-development, well-meaning but stupid government interference and so on.

    Anyhow, the first step is defining the problem. What is the housing crisis?

  4. Posted 23/05/2023 at 16:40 | Permalink

    And that’s where you’re wrong. There is no “next bottleneck”. The planning system is the only bottleneck. The rest are short-term problems, not bottlenecks.
    Building houses is really not that hard. It’s not a high-tech industry.
    Even if you think planning liberalisation won’t fully solve the problem on its own, you should still support it (and those calling for it) as a partial solution that’s surely better than doing nothing. It doesn’t stop you from also, in parallel, supporting some campaign for tighter migration controls. But just like CAMRA will never be hugely interested in wine duty, most YIMBYs will never be hugely interested in cutting immigration. Their issue is the supply side, like CAMRA’s issue is beer.

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