We all know
there is a housing crisis. The latest data show that on the best measure of affordability (the price of a house mid-way in
the price range relative to earnings mid-way in the range), the national
position is half 1997 levels and not a
lot better than at the worst point in 2007.
The debate
about causes is full of myths, many self-serving - such as the claim that weare in danger of concreting over England. As I showed in a recent article, the
reality is that Greenbelts cover more than 1.5 times all our built- up areas
put together. Surrey has more land for golf courses (2.65%) than for actual
houses (2.06%).
The most
important reason for the crisis is that we have been drastically restricting
the amount of housing land since 1947. Furthermore the recent changes embodied
in the National Planning Policy Framework, far from increasing the take of ‘Greenfields',
seem to have done the opposite. House completions have increased from the
catastrophically low levels of 2009 but housing starts – what is in the
pipeline – have fallen by nearly 10% and planning applications are
flatlining.
There are
problems of market failure, and land markets fail more than most. So they need
regulation, which is what planning should do. But effective regulation also needs
to be informed by an understanding of how markets work. The problem is that our
planning system seems to proceed as if it could entirely suspend the laws of
supply and demand.
It is not
just that restricting the supply of something when demand is rising (in this
case land when incomes and population have been rising) causes the price to go
up. But if you persistently build Reliant Robins and people prefer VWs, then
VWs become a luxury good and unaffordable. Roughly speaking, that is what we have been
doing with housing supply. We have not just been restricting the supply of land
to build them on but we have persistently been building the wrong sort of
houses in the wrong sort of places.
Houses do
not move about. So demand is local - primarily where there are decent jobs. But
also the evidence shows that as people get richer they try to buy more space (VWs rather than Reliant
Robins) with a bit of garden and somewhere to put their VW.
We may wish
to persuade people to use cars less and revive the prosperity of declining parts
of the country. But it is insanity to
try to achieve those objectives by refusing to allow houses to be built where
there are jobs, where they are most expensive and without reasonable space. When
lobbyists for the Greenbelt claim there is an ample supply of brownfield sites,
not only do they fail to recognise that brownfields are a legal concept
including some of the highest quality amenity land in Britain but not much of it is where job prospects are good.
This is true
even within southern England. Corby in Northants has a brilliant record ofbuilding houses.
Daventy in Northants does not. Corby has the most affordable houses in
Northants while Daventry the least. The unemployment rate in Daventry is less
than half that in Corby (link). A similar tale can be told of Lancashire comparing
Preston and Ribble Valley; or Watford compared to Three Rivers in Hertfordshire;
or Aylesbury Vale compared to Chiltern in Buckinghamshire.
All over the
country more houses are going up where they are already least unaffordable and
where unemployment is high relative to surrounding areas. London illustrates
this perfectly. Not only are we concentrating new building on the land most
exposed to flooding and rising sea levels in the East Thames Corridor, but as the table below shows, we are building them
where they are already least unaffordable and where job prospects are worst.
London Boroughs: The builders versus the non-builders
Mean % addition to stock 2004-12
|
Affordability Ratio (median house
price/median earnings
|
Unemployment Rate 2012/13
|
|
4 biggest builders1
|
14.57
|
9.98
|
11.35
|
4 smallest builders2
|
2.11
|
15.07
|
6.75
|
1 Islington, Hackney, Southwark & Tower Hamlets
2 Kensington & Chelsea, Merton,
Bexley & Sutton
And it is
not just across broader areas that there is this focus on building houses in
the wrong places. It is within cities too. In my new book with Max Nathan and Henry Overman, I give a striking example. In 2009, the West Midlands Regional Spatial Strategy was being discussed in a public hearing. When the local planners were asked why the plan was not allowing
building in more suburban areas, at lower densities, the answer was that if
sites like that were available developers would just ‘cherry pick them’. In plain English that means that developers
would try to build the sort of houses people wanted to live in the places they
wanted to live. So obviously we should not let them do that.
All this
means that we have far too many Reliant Robins and not nearly enough VWs in our
housing stock. Except when it comes to housing, housing Reliant Robins are even
less mobile than the real things. Not only are our houses inferior in terms of
type and space, they are in the wrong places.
