UK needs to stop deliberately inflating residential land prices

 
Allister Heath
MY column yesterday revealing that the French are building three times more homes than the British every year – an astonishing fact which highlights the gravity of our housing supply crisis – elicited a number of typical counter-arguments. The most common was that the French have plenty of land, and we don’t, so it isn’t surprising that they can build more. But that’s not quite right.
Of course, France’s land mass is larger, and given that it is home to a similar number of people, its population density is lower. But that is almost irrelevant. The UK’s problem is not Hong Kong-style physical scarcity – our issue is artificial scarcity caused by rules that restrict how much land can be built upon. We could build as much as France if we wanted to.
Policy Exchange’s Alex Morton has collated the numbers. In 2005, one survey found just 10 per cent of England was developed, including all commercial, residential, and industrial land – and the majority of this was made up of gardens and parks. A separate piece of research revealed that 6.8 per cent of England is urban; once again, the majority of this is gardens, parks, allotments and so on. Just 2.3 per cent of the country is actually concreted over or covered with homes, roads, offices or car parks.
Land per se is plentiful and cheap: in Oxford, a hectare of agricultural land with no planning permission is worth £20,000. The same space is worth £1m with industrial planning permission and £4m with residential planning permission. The scarcity is entirely man-made and political in nature.
Another reason why France’s lower population density doesn’t matter is that house-building there is not taking place in the middle of nowhere. Many small villages are dying. Like in the UK, most people need to live in commutable distance of jobs, and that is generally in and around urban areas.
One result of the UK’s policies is that people are desperately seeking more liveable space wherever they can find it – they are decking gardens, building extensions and turning front gardens into car parks. Satellite data shows the built up area of London grew by 1.5 per cent a year in the 1990s as we crammed more people into the same space, with much of the increase from reducing green space. It is wrong to criticise people for trying to better their lives when land prices have been artificially pushed up by idiotic government measures.
Of course, we need to reboot urban centres outside London and other UK regions, most of which have fallen behind badly in the past 15 years; taxes and regulations need to be cut, an entrepreneurial revolution unleashed and shale gas developed. But London will continue to thrive, attracting many more people and investment. This is an astonishing opportunity for this city and it would be absurd if it were squandered by exploding costs and a desire by some to contain London within its mid-20th century borders.
There is room for a lot more brownfield development in and around London. Second-rate, declining commercial areas should also be turned into housing, something which new rules from the coalition will make much easier. The digital revolution means lots of retail space is becoming obsolete. But none of this will be enough (and homes on brownfield are more expensive to build than on greenfield, and therefore cost more). We also need to build upwards – and London needs to expand quite substantially outwards, with hundreds of thousands of spacious, high quality and modern family homes with gardens needed over the next few years as our baby boom intensifies. We need new suburbs and perhaps completely new garden cities, with rail and road connections to central London.
Whatever the right solution turns out to be, one thing is clear: we cannot continue as we have for the past few years.
allister.heath@cityam.com
Follow me on Twitter: @allisterheath