It takes the international think tanks some time to catch up with reality of course, but they do often enough get there eventually. Which is how the OECD is now recommending that Britain start building upon the Green Belt surrounding the major cities. This is something that we at the Adam Smith Institute have been recommending for a decade now. For Britain does have a problem with house prices--as we also hear today the average house is now 7.6 times the average wage in the country. Part of that is low interest rates of course, but by no means all of it. Much of it is simply the restrictions placed on the building of houses where people would like to live in houses. The solution therefore is to reduce the restrictions:
Years of sluggish wage growth and a booming property market have made house prices less affordable than ever before, according to new official figures.
The average price of a house in England and Wales is now 7.6 times the average annual salary, the Office for National Statistics said, more than double the figure of 20 years ago.
The ONS numbers show house prices have risen 259 per cent since 1997. Over the same period average earnings have increased by 68 per cent.
That's obviously a problem:
Researchers said: ‘Governments cannot afford to let up on reform if they want to escape the low-growth trap many of them are facing and to ensure that the gains of economic growth benefit the vast majority of citizens.’
Detailed recommendations for boosting housing supply included: ‘Further relax regulatory constraints to release more land for housing, in particular by thoroughly reviewing the boundaries of protected areas of the green belt and by easing skyline restrictions.’
It does seem pretty obvious as a solution, doesn't it?
Britain’s economy is stifled by the green belt and other building restrictions which have crushed the supply of housing, pushing up prices and making it hard for people to move home to find work.
Unaffordable housing is harming productivity which damages GDP growth and living standards, the Organisation for Economic Co-operation and Development has warned.
The basic facts are that Britain's built environment is some 10% of the land area. Housing is about 3% of that total land area. We've not therefore got a shortage of land. However, the right or ability to build upon a piece of land is restricted by the granting of planning permission--zoning to Americans. A piece of farmland in the SE can be had for perhaps £10,000 a hectare--and scrub land for less. Add planning permission to that and value soars to £500,000 to £1 million. Just by looking at those prices we can see that it's the permission to build which is the constraint, not the availability of land.
The obvious answer therefore is to issue more planning permissions. And to do so where people would like to live in a house. Which is the rural areas surrounding the current urban centres where the work is. But those are exactly the areas "protected" by those Green Belts.
At which point a little history. In the 1930s the advent of the motor car meant that more rural areas became habitable for those who worked in town (just "town," not any particular one). The free market housing industry thus built those ribbon suburban developments around the big cities, on and just off the major road connections. These are the areas that people pay an arm and a leg to live in today. This entirely horrified the planners of course, or at that time the would be planners. What? People being able to live where they'd like to live?
As a result of this immediately after WWII we got the Town and Country Planning Act and we've been updating it since. This marks off those areas where people would like to live as verboeten for houses which people would like to live in. This is our actual problem. We've plenty of land which could be built upon if only we were allowed to build upon it. The restriction is what makes it all so expensive. And it's worth pointing out that modern British housing is the smallest in area per inhabitant of any in Europe.
The solution is thus obvious. Lift the restriction upon permissions and the problem will be solved. Note well that it is said we need 300,000 new dwellings a year at present. The last time the private housebuilding industry supplied this was in those 1930s when permissions were easily available. It also created the investment boom which lifted Britain out of the Great Depression.
As the OECD implies but doesn't quite openly state the solution to Britain's housing woes is to blow up the Town and Country Planning Act and successors. As I've been saying for a decade now--those international think tanks are slow but they get there eventually.
