EVERY so often, a piece of research comes along which is a must-read. A document yesterday from the Institute of Economic Affairs is one such report: it reveals in no uncertain terms why house prices are so high in the UK, and what needs to be done to ensure that generations of young people are not permanently priced out of the market or forced to live in tiny, uncomfortable spaces.
All parts of the UK are expensive. Even some highly sought-after North American locations such as Washington DC and Chicago are cheaper, relative to earnings, than any region in the UK. Only Australia shows a similar lack of inexpensive housing. The picture is even worse if homes are adjusted for size or age – the UK’s stock is older and much smaller than many other nations’.
The reason that is usually given for all of this is that Britain has run out of space. The reality is very different. The UK has 247 inhabitants per square kilometre, which is not that high (though of course is more than the likes of America or France). Numerous developed nations record much higher figures: for example South Korea (484), the Netherlands (395), Belgium (341), Japan (339) and Israel (327). Nine European regions have greater population densities than England’s south east.
The claim that the UK is now almost entirely concreted over is equally fatuous. Only one tenth (9.9 per cent) of the English surface area is developed. The rest mostly consists of woodland, grassland and farmland (and some water). Even within the developed tenth, the IEA report reveals that the single biggest item is domestic gardens (4.3 per cent of the total; a small fraction of this is probably actually used as off-street parking spaces). Land which is covered with buildings (including homes), industrial structures, streets, roads, parking sites, rail tracks and so on accounts for a mere one twentieth of the whole English surface area. The situation is only slightly worse than average in the south east, where 84.7 per cent of the total surface area isn’t developed. However, a greater proportion is made up of gardens (6.3 per cent).
In England, and much more so in the UK as a whole, overdevelopment, migration and over-population are not the main issue. Average UK household sizes are not especially low either. As Kristian Niemietz, the report’s author, puts it, “developable land is available in plentiful abundance.” The problem is politics: planning rules make it impossible to build the right number of homes in the right places. He cites international empirical evidence produced by numerous academics showing planning restrictions are the key determinant of housing costs internationally.
Council house privatisations aren’t a reason for the UK’s problems either. Britain’s social housing sector is still one of the largest: it accounts for up to one fifth of the total, more than Denmark (19 per cent), Sweden (17 per cent), France (17 per cent), Finland (16 per cent), Ireland (8 per cent), Belgium (7 per cent), Slovenia (6 per cent), Germany (5 per cent) and Italy. In any case, there is no reason why the state should own the homes in which it houses the poor.
The answer cannot be yet more demand-side policies subsidising mortgages or reversing the change to housing benefit; the problem is one of supply. We need to allow the private sector to build more and better. Forget the recession: development rates in the UK have been depressed for decades. We have built far fewer homes per 10,000 inhabitants than most of our competitors for years. It is time for a historic U-turn: we need homes fit for a modern, prosperous country.