Housing

Build, Baby, Build!

In a new paper Senior Fellow Nigel Hawkins explains how we can get Britain building and end the housing crisis:

  • During the 1950s, the UK’s annual new house-build exceeded 300,000 units. Prior to the introduction of wide-ranging planning legislation in 1947, the annual figure had been even higher in the 1930s.

  • In recent years, despite a steadily rising population, around 200,000 new units per year have been built, so that the English housing stock figure is now c23.8 million dwellings. The shortfall in new housing stock has contributed to soaring property prices, and the consequential erection of major financial barriers to first-time buyers.

  • For under-35s, unless they are high earners or the beneficiaries of family financial support, the hopes of becoming a homeowner before their mid-30s are receding. Many of this age-group are accepting—perhaps reluctantly—the attractions of home rental rather than home ownership.

  • Following the financial crisis in 2008/09 and despite ultra-low interest rates subsequently, securing the necessary mortgage has often been challenging; indeed, house-building levels fell.

  • While constructing more homes is a widely-held priority, volume housebuilders (VHBs) face real challenges in navigating the time-consuming planning process, before even a brick is laid.

  • This Paper examines a number of potential ways that Britain could increase the level of housebuilding at a national and local level: Local authorities must reverse their opposition to smaller units in order to provide Londoners with more housing choice at affordable levels.

  1. Major planning reform

  2. Modest Green Belt encroachment

  3. Easing constraints for medium-sized/small house-builders

  4. Dismantling some rental restrictions covering Housing Associations

  5. Promoting innovation within the house-building sector

  6. Establishing some Infrastructure Developments Zones (IDZs) which could offer tax incentives and relaxed planning laws

  7. Developing surplus public land

  8. Kickstarting the New Garden Towns proposals

Size Doesn’t Matter: Giving a green light to micro-homes

A new report by Vera Kichanova, an urban policy researcher with Zaha Hadid Architects and PhD student at King's College London, argues that Britain should legalise micro homes:

  • Housing is the most crucial problem faced by Londoners as supply has not kept pace with demand, leading to a quintupling of average prices over the past 50 years.

  • Many are now forced to endure long commutes, live in overcrowded shared flats, or leave the city. In the past 20 years, London’s population has grown by 25%, but the number of homes by only 15%. By 2025, 3.5m Londoners will be living in rented housing, with 79% of the adults who moved to London in the last year renting.

  • In addition to reforming the planning system to allow more houses to be built, micro-housing would enable land to be used more efficiently.

  • Micro-housing is not for everyone, however, for many younger individuals smaller homes would provide the opportunity to live centrally: close to work, entertainment and other amenities at an affordable price.

  • Micro-housing is about expanding the choices available to the many Londoners who are open to living in smaller apartments.

  • Micro-housing is not the same as cramped sub-division of existing units, they are smart, modern, custom designed units that make good use of space which have won prestigious architectural awards. Micro-housing is often accompanied by communal amenities such as games rooms and open living spaces that help address loneliness.

  • Local authorities must reverse their opposition to smaller units in order to provide Londoners with more housing choice at affordable levels.

Flexible Right to Buy

Many in council subsidised accommodation are trapped paying rent to the state due to current prices in the UK’s cities. High prices mean, even with the current Right to Buy discount, that many mortgages are out of reach for those in these homes. Today we call for a reboot of Help to Buy: by making it flexible.

  • UK has the second-largest social housing sector in the EU, and over half of tenants in the sector want to own their own home.

  • The Right to Buy works for some, but some social tenants live in expensive properties which they cannot afford to buy.

  • Almost 700,000 local authority owned homes are in areas where median house prices exceed £250,000. Over 200,000 of these are in areas where median house prices exceed £500,000.

  • Social tenants eligible for the Right to Buy should be given a Flexible Right to Buy, entitling them to buy a new home, using the value of their Right to Buy discount.

  • The tenant’s previous home would then be sold, funding the discount and raising additional revenue.

  • A conservative estimate of the impact would see 21,000 tenants take advantage of the scheme with £2 billion of discounts on £9 billion of stock and net receipts of £7 billion.

  • An ambitious estimate of the impact would see 197,000 tenants benefit, with £83 billion of stock and £21 billion of discounts and net receipts of £62 billion.

  • Housing stock would be better matched to people’s circumstances, with a cooling effect on overheated local markets.

  • Some friction would be removed from labour markets, resulting in improved productivity and wages.

Read the whole paper here.

Only Capitalism Can Solve The Housing Crisis

The housing crisis of ever rising prices and unaffordability can only be ended by a capitalist revolution in housing, argues leading architect Patrik Schumacher in a thinkpiece for the Adam Smith Institute.

Executive Summary:

  • Restrictive planning laws have led to enormous growth in London’s rental and house price to earnings ratios

  • Housing crisis is a failure of politics not markets and is the result of restrictive planning laws.

  • Government should resist calls to impose rent controls or mandatory long-term tenancies as they reduce supply and hamper labour mobility

  • Sadiq Khan’s plan to mandate that up to 50% of developments be “affordable” will discourage development and push up prices elsewhere

  • Micromanaging land uses creates high price distortions in our cities and should be abolished

To read the full essay, click here.

YIMBY: How To End The Housing Crisis, Boost The Economy And Win More Votes

  • It has become widely accepted, including by the government, that the UK is in the midst of a “housing crisis”, where prices and rents have rocketed in key locations.
  • There are a range of policies that would solve this, and many of them are well known. But none have been implemented because they have not been able to generate support from existing homeowners and the residents of areas that would see increased building.
  • We propose three policies that would hand power back to residents; ways of solving the housing crisis that will also win political parties votes. Each would make a huge difference alone; together they could have a transformative effect on the housing situation in Britain:
  1. Allowing individual streets to vote on giving themselves permitted development rights, to build upwards to a maximum of six storeys and take up more of their plots.
  2. Allowing local parishes to ‘green’ their green belts, by developing ugly or low amenity sections of green belt, and  getting other benefits for the community in turn.
  3. Devolving some planning laws to the new city-region mayors including the Mayor of London. Cities could then decide for themselves if they want to expand and grow and permit extra housing, or maintain their current size and character.
  • Not only do young tenants and aspirant homeowners stand to benefit from a building boom that delivers more housing, but the economy could get a major jolt at a time of slow growth and difficult productivity.
  • Evidence suggests that GDP per capita would be 30% higher—we would produce and earn nearly a third more every year—in just 15 years if we built enough homes in the right places. That’s £10,000 extra on the average household income.
  • Politicians can solve the problem if they are willing to think big and propose policies that make reform work for everyone. Reforms that make most voters worse off have little chance of happening.

Read the full paper.

Children of When: Why housing is the solution to Britain's fertility crisis

Andrew Sabisky discusses the increasing difficulty that young couples are having in having children when they want to and having as many of them as they want. The biggest driver of this effect is the rise in housing costs and fall in house sizes, which constrains family sizes and is driving the country towards a demographic crisis.

  1. In the UK and across the developed world populations are rapidly ageing and total fertility rates are substantially below replacement level—meaning a falling ratio of workers to dependents.
  2. In recent decades, immigration has propped up the supply of workers and kept the population pyramid in shape, but in the wake of Brexit, and an expected decrease in immigration, there is a clear need to raise birth rates.
  3. The nation’s low birth rate is not just an economic problem. International survey data indicate that many women across the developed world are not able to have as many children as they would like.
  4. International evidence shows that housing markets have substantial effects on fertility: rising house prices may boost fertility for homeowners, but slash fertility amongst renters — between 1996 and 2014 157,000 children were not born due to the cost of living space.
  5. In little more than a decade, home ownership rates have collapsed among young people, as house prices and rents continue to rise. If current trends are maintained we may expect fertility to fall even further.
  6. Free-market reforms to housing regulations could help raise fertility and improve the country’s long-term economic and social prospects. 

Read this paper.

A Garden of One's Own

• Green Belts are unsustainable. Urban containment policies push up rents and house prices and generally increase the cost of living, force households into ever smaller homes and more cramped transport, and are harmful to the environment. This hugely depresses people’s quality of life.

• In The Green Noose we recommended a policy of “Abolish and Protect”, whereby substantial parts of the existing Green Belt would be re-designated under other land-use classifications, while the remainder would be available for development. This would allow markets to operate and so ensure that welfare-maximising solutions emerged.

• However, debates about Green Belt policy always descend into demands to know where development will take place, or claims that every hectare of declassified land would be concreted over. While the former misunderstands the role of planning policy, and the latter is disingenuous, such arguments are almost impossible to avoid.

• This paper seeks to provide examples of where development could take place. As it is location-specific, we have chosen to focus on one Green Belt – the Metropolitan Green Belt around London. In doing so we (artificially) distinguish between the Metropolitan Green Belt and “London Green Belt” (i.e. those parts of the Metropolitan Green Belt within the boundaries of Greater London).

• Our aim is not to prescribe sites for development, but to demonstrate that there is ample land within the Metropolitan Green Belt that would be suitable for development and could be built upon without undermining the overall purpose of Green Belt policy (as defined by the NPPF).

• We look at six scenarios:

1. Declassify Metropolitan Green Belt land within walking distance of a rail way station
2. Declassify Green Belt land in London within cycling distance of a railway station
3. Allow development of Green Belt golf courses
4. Infill areas of Green Belt that do not support Green Belt Policy
5. Remove agricultural land from the Green Belt
6. Declassify and re-use of already developed Green Belt land.

• Each of these would make a dramatic contribution to meeting housing need in London and the South East; in three cases, a single measure would more than meet all additional housing need until 2030.

Read this report.

The Green Noose

  • Despite academics, politicians, and international organisations recognising that the UK is facing a housing crisis, it is currently far less developed than many imagine, especially when compared to similar countries. Indeed, only two members of the EU 27 have less built environment per capita than the UK: the Netherlands and Cyprus. 90% of land in England remains undeveloped, and just 0.5% would be required to fulfil this decade’s housing needs.
  • Green Belts are not the bucolic idylls some imagine them to be; indeed, more than a third of protected Green Belt land is devoted to intensive farming, which generates net environmental costs.
  • The concept of ever-expanding urban sprawl is mistaken and pernicious. In addition, Green Belts can give rise to “leap-frog development”, where intermediate patches of land are left undeveloped due to restrictions, a phenomenon indistinguishable from what many understand urban sprawl to be.
  • By encouraging urban densification, Green Belts take green space away from those places where it is most valued. Each hectare of city park is estimated to be of £54,000 benefit per year, compared to a mere £889 per hectare for Green Belt land on the fringe of an urban area.
  • There are substantial welfare costs of Green Belts. They have made accommodation more expensive and smaller, increased costs for businesses (especially relative to other European cities), and have contributed to the volatility of house prices.
  • The avenue of reform we favour is the complete abolition of the Green Belt, a step which could solve the housing crisis without the loss of any amenity or historical value – if only politicians and planners had the courage to take it.
  • Failing this, we conclude that removing Green Belt designation from intensive agricultural land would also enable the building of all the housing required for the foreseeable future, and could help ameliorate the catastrophic undersupply of recent decades.
  • In the short term, simply removing restrictions on land 10 minutes’ walk of a railway station would allow the development of 1 million more homes within the Green Belt surrounding London alone.

Read the report.

Planning in a free society

London as a case study for a spontaneously planned future.

The Town and Country Planning Act has failed. Restrictions on development, the Green Belt and the nationalized planning permission system have all helped to create a national housing crisis. In this report, an advance paper from the forthcoming Adam Smith Institute book A Manifesto for London, Tom Papworth argues for a radical reform of the British planning system, replacing it with a local, contractual and pluralist system to allow development whilst conserving areas of natural beauty and national heritage.

Read this report.