So, we’re talking about house prices and housing supply:
The government response to soaring inflation is to promise to build more homes at speed by loosening the planning system. It is a “supply side” solution, which sounds logical: rapidly increase the number of homes being built and prices will inevitably come down. It is a highly contentious approach, which cost the Conservatives the Chesham and Amersham byelection, but it sounds as if it should work.
The reason it sounds like it might work is that it will work. This being The Guardian of course there’s a but coming:
The problem is that the housing market does not function like a pure market,
The answer to which might well be to remove those limitations which stop housing working like a pure market. After all, it did so work before the Town and Country Planning Act 1947. So maybe that’s the problem?
Cities around the world, from Auckland to Vancouver, are facing an affordability crisis, with huge price rises and extreme gentrification in cities linked to global capital flows and foreign investment rather than local circumstances. This ensures that increased supply will not bring prices down; the new luxury apartment complexes that now characterise British cities such as London, Manchester, Bristol and York, to name but a few, remain out of reach for the majority of house buyers. Many are sold “off plan”, straight to foreign investors, before they have even been built.
That doesn’t matter in the slightest. Building an extra dwelling is building an extra dwelling. It increases supply by one unit and thereby reduces the price of all other units by whatever the influence of an extra unit is.
It’s entirely true that building a new Rolls Royce doesn’t directly aid the average car buyer. And yet the existence of that extra car means someone, somewhere, isn’t competing for that £400 banger Ford Escort, thus aiding that buyer of bangers.
Housebuilders are businesses accountable to their shareholders, and it is well documented that it is not in their interests to flood the market with homes, as it would damage their profits. Instead they control the rate of production and trickle out limited numbers of homes from large developments to keep prices high. As a result, repeated government reviews and politicians from both parties have consistently identified “land banking” rather than a restrictive planning system as the key barrier to supply-side solutions.
And that’s just plain flat out idiocy. The claim is that the housebuilders have a corner on the supply of new housing – by controlling all of the planning permissioned plots. OK, say that’s true. We know how to solve market corners – flood the market with supply. That is, if the claim is true about landbanking then that’s the proof perfect that it is a supply issue.
There is also little incentive to build high-quality, larger homes, leaving the UK with some of the smallest homes in Europe, with the most attractive sites for developers in city centres suited to small luxury apartment developments that generate high income.
Well, that and the law insisting that there be a minimum of 30 dwellings per hectare. That means 300 metres square for a house and garden – titchy or what?
If there is widespread recognition that the planning system is not the main barrier,
Well, the correct answer there being that the recognition is only among idiots and the ignorant. The planning system is the barrier. Therefore the solution is in changing the planning system.
Anna Minton is the author of Big Capital: Who is London For? and reader in architecture at the University of East London
We could say this is just architects trying to do economics which is is going to work about as well as economists doing architecture. My preference is that this is another proof of the need for a proper purge of academia. No, not on political or ideological grounds but can’t we please get rid of the idiots at least?