Labour's land grab will only exacerbate our housing crisis. Here's why

Ed Miliband is set announce details of how a Labour government would intervene in the housing market to boost supply. A Labour government would give local councils the power to purchase land or charge fees to believe developers are hoarding land.

The Labour leader will say in a speech on Monday:

We will back home builders. But we will tell land hoarders with sites that have planning permission that they must use it or lose it.

He added that the industry was making vast profits:

They have soared 557 per cent since this government took office - even though homes have been built at their slowest rate witnessed in peacetime for almost a century.

But there are large amounts of land - enough to build more than a million homes - earmarked for houses which have not been built.

Miliband claimed his plan would lead to 200,000 homes being built every year until 2020. Markets did not take kindly to Miliband's latest interventionist policy. Shares in British house builders were trading lower with Persimmon are down 1.7 per cent at £11.16 and Barratt Developments is down one per cent at 325p.

The argument being advanced by the Labour leader is that builders are sitting on huge tracts of land refusing to use their development permissions, waiting for the price to rise. In order to get housebuilding on the move, so the argument goes developers must be penalised until they start building.

At best this can be charitably described as a fringe issue. It is not speculative developers who are responsible for a lack of supply and rapidly rising prices but a draconian planning system. Speculative hoarding remains largely restricted to markets where the supply is fixed.

As Kristian Niemietz of the Institute of Economic Affairs explains:

You can hoard a bottle of a special vintage Bordeaux wine, or a rare book no longer in print. But you would not hoard a bottle of supermarket Pinot Grigio, or a copy of a Game of Thrones book.

Claims about land hoarding have been made before and found to have little evidence to support them. Five years ago the Office for Fair Trading concluded in a 2008 report:

The homebuilding industry, which owns a significant landbank, does not appear to systematically hoard land with implementable planning permission; most land of this type is under construction.

Miliband will attack the government for focusing on policies that increase raise demand without increasing supply. He is expected to say:

The result is a broken market where it now takes ordinary families over 20 years to save enough for a deposit and those renting privately are paying as much as half their income on rent.

Miliband is right to draw attention to rising prices. Rightmove has warned prices could rise as much eight per cent in 2014. However, the Labour leader's proposals for further controls and micro managing will do little to solve the problem and may have a host of unintended consequences.