Half the problem, and half the solution


The UK's land-use system drives up housing prices. Though academics have been telling the government that for decades, apparently a few more MPs have just noticed this.  The question is whether they'll actually do something about it. At the moment, they seem to get about half of the problem, and half of the solution... hey, that's better than normal! Zoning restrictions and complicated bureaucracies drive up land prices. When supply is artificially restricted but demand increases, amazingly, prices go up! 

The problem is not simply the "stratified communities" or a lack of warm fuzzy feelings that these MPs seem to be concerned about. Land restrictions benefit exactly one group: wealthy homeowners.  Everyone else suffers the consequences, from the obvious (higher housing prices) to the subtle (higher food prices). There is a vast body of research that suggests that zoning laws redistribute wealth from the poor to the upper and upper-middle classes.

At least politicians now realize where the solution lies: to reducing the barriers to production. But they aren't willing to go far enough. The government wants to continue to play social engineer in the attempt to artificially impose a sense of community onto towns by requiring that new homes be low-cost and sold only to local labourers. So they'll lift one layer of restriction, but create a whole new set of restrictions and bureaucratic processes for developers to deal with.

The economic impact of the lack of a real market in land in the UK is widespread. At the moment, I'm working on a paper that seeks a middle ground – a market-based solution that will give residents control over their own neighbourhoods but prevent them from imposing the costs of their preferences on the rest of society. In the meantime, any action that actually lifts the barriers to building affordable housing would be a welcome step.