As we've been telling you for some time now a goodly portion of the house price problem in Britain is because of the insanities of our housing planning system. As the Royal Economic Society is now pointing out:
House prices in the South East of England would have been roughly 25% lower in 2008 and perhaps 30% lower in 2015 if the region had planning regulations of similar restrictiveness as the North East of England.
This really is what we have been telling you:
Today housing space in England – particularly in London and the South East but also in other urban centres and large pockets of rural England – is among the most expensive and unaffordable in the world. Hilber and Vermeulen’s study shows that this is in large part due to supply constraints imposed by the planning system.
According to the research, the problem is clearly that there is too little supply given the strong demand for housing in parts of the country. But why? The study explores three possible types of supply constraints:
• The first type is regulatory and dates back to the Town and Country Planning Act of 1947. The UK planning system since 1947 is extraordinarily rigid by world standards. Urban containment through ‘green belts’, strict controls on height, lack of fiscal incentives at the local level to develop and ‘not in my backyard’ (NIMBY) behaviour facilitated by the planning regime all make it very difficult to build new homes.
• The second type is physical. Local scarcity of brownfield or greenfield land makes residential development in desirable locations very costly.
• The third type is uneven topography. It is very difficult to build new homes in places with steep slopes.
So which of the three types is most important in the case of England? The researchers use data from over 350 local authorities from 1974 to 2008 to explore this question. Their findings strongly suggest that regulatory constraints are the main culprit.
As we have indeed been saying.
So, abolish the Town and Country Planning acts and return us to the 1930s, the last time the private sector kept up with housing demand. The point being that markets really do work and regulation of them often does not.