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Blighty - Britain


08-07-2014

Housebuilding in Britain

Yes, planning policy is the cause of the housing crisis

TODAY’S FT has an interesting letter from Shaun Spiers, the director of the Campaign to Protect Rural England (CPRE), a pressure group which campaigns against development in England’s countryside. Missives from the CPRE are not normally worth paying any attention to, but this one is interesting because it explains one of the pervasive myths about the cause of Britain’s housing crisis. Planning is not the problem, says Mr Spiers—rather, it is the fault of the state for not building enough homes itself.

Here is the key paragraph:


“What you do not mention is that when this country built enough houses, for 35 years after the war, the public sector built more than half of them. Private sector supply has remained fairly steady throughout the postwar period, allowing for the economic cycle, but public finance now goes to paying for housing benefit rather than building homes. This is why we now have a housing crisis. Any government that is serious about tackling it should focus on shortcomings in the UK industry and the lack of public funding, rather than fixating on planning.”


To make a couple of points:

First, raising the period when the public sector built so many houses is disingenuous. You can bet a spectacular amount of money that if any government or council were to try to build a lot of new socially-rented houses in the countryside, the CPRE would be the first to protest, complaining about the loss of lovely/important pesticide-covered fields.

Second and more importantly, while the public sector did build a lot of homes in the post-war era, they did so often by demolishing pre-existing houses. Often, the idea was not to increase the density of population in an area but to decrease it: whole streets of densely-packed Victorian terraces were demolished to be replaced by modern flats surrounded by parkland. In the 1960s and 1970s house-building routinely passed 300,000 units per year but the net addition to the stock was far less (see this chart here). The exception was in the creation of new overspill towns—places like Harlow and Milton Keynes, built on pretty green fields and connected up with brand new motorways cutting through the countryside. A quick search of “CPRE new towns” or “CPRE motorways” reveals what Mr Spiers would likely think of any such proposals today.

The truth is that Britain’s housing crisis is almost entirely about the use of land, which is determined largely by planning policy. A hectare of agricultural land on the edge of Oxford may cost £6,000-£10,000. Similar land with planning permission can be worth £4 million. That huge gap is what encourages land speculation, and so creates many of the problems Mr Spiers raises about the state of the building industry. Since only a small amount of developable land is released each year by councils, developers compete entirely at the point when they are buying land, rather than at the point when they are selling the homes they build. The firms that survive are the ones with the best access to finance, rather than the firms which build the nicest houses.

If Mr Spiers must be satisfied, there is a solution to Britain’s (or better yet, London’s) housing crisis which does not involve building on green fields. But it wouldn’t be easy. Typical “brownfield” land is expensive to build on and in any case, usually in the wrong place. Whacking speculators with lots of punitive taxation may help to release a little more land, but not much. The only solution that might actually make much of a difference involves demolishing lots of existing homes and building new ones on the land freed up. Large parts of inner-London are not very densely populated: redevelopment could massively increase the number of people who can comfortably squeeze into the capital. Unlike suburban development, that would reduce the pressure on roads and public transport and make people's lives easier by allowing them to live closer to their work.

The problem with this plan is that it would require a huge interventionist state willing to force people out of their homes, concrete over their gardens and create entirely new neighbourhoods on the land freed up. To satisfy demand, it would have to do it quickly: in London, we would have to demolish perhaps 50,000 homes a year. People would be—rightly—outraged. The scope for corruption or simple stupidity would be huge. Just look at the legacy of the last time we did it in the 1950s and 1960s. While some social housing built then is extremely pleasant, far too much was in the form of grim, cheaply-built concrete blocks surrounded by wasted scrubland. Even if it was well constructed, surveys repeatedly show that—to the frustration of the new urbanist planners—what most British people still want is a house in a suburb with a garden.

Meanwhile, the green-belt land we are protecting from the bulldozers is mostly not gorgeous countryside, but scrubby lettuce fields, golf courses and pony paddocks. Its protection is an enormous subsidy to various rich people—golfers, horse-owners and farmers—at the expense of people who would like to buy new homes. To a reasonable extent, it doesn’t even protect countryside from development, but rather pushes new house-building out to places like the Chilterns, which though enormously beautiful, is not in the green-belt and so is less protected from development.

The only realistic solution is to force the release of more land for housing where it is most needed: on the edge of cities, and particularly in London's green belt. Planning policy is the primary determinant of what land is released for house-building, and so yes, planning is the problem.

www.economist.com

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