Unaffordable Housing – Fables and Myths

Published by Policy Exchange (London), June 2005 (PDF)

Winner of the Prospect Magazine Think Tank of the Year Award for the best publication by a British think tank in 2005


David Willets MP (The Times, November 30, 2005):
“Policy Exchange have made a massive contribution to the debate with the excellent work by Alan Evans and Oliver Hartwich. There are some really interesting ideas here.”

Lord Andrew Adonis, Parliamentary Under-Secretary of State:
“The very model of the good think tank publication…It is hugely challenging – and perhaps paradigm-shifting in the conclusions…it is also extremely well and accessibly written, and excellently produced and presented.”

Financial Times, September 23rd and October 7th, 2005:
“Superb” … “Outstanding”

The Daily Telegraph, July 20, 2005

Sir Max Hastings, President of the Campaign to Protect Rural England, The Guardian, August 17, 2005
“Delivered a broadside … in support of the Prescott view that restrictive planning law is the principal impediment to satisfying demand.”

The Times, August 3, 2005
“Derides opponents of uncontrolled development in the countryside as owner-occupiers, conservationists and Nimbys”

Independent on Sunday, July 17, 2005
“A tough-minded set of answers”

Frankfurter Allgemeine Zeitung, July 25, 2005
“Evans and Hartwich explain why Great Britain has the ‘oldest, pokiest and at the same time costliest’ housing supply”

Book Description

This new report, launched by independent think tank Policy Exchange, argues that Britain’s Soviet-style planning system means that we live in some of the smallest, oldest and costliest homes in the developed world.

Authored by Professor Alan W. Evans and Dr Oliver Marc Hartwich for Policy Exchange, Unaffordable Housing shows that the British culture of centrally planned development (established by the 1947 Town and Country Planning Act and embraced to this day by politicians of all parties) has resulted in a shortage of affordable, desirable, high-quality housing.

But is it what we want? And if not, why do we still support the system that provides them?

Defenders of the status quo – owner-occupiers, conservationists and NIMBYs – use a number of arguments to support their position. These groups argue that we live in a small, overcrowded island, that new development is only “sustainable” if it takes place on brown field land or through the densification of towns and cities, and that a buoyant housing market is crucial for the economy.

Unaffordable Housing argues that these are myths that can be debunked. The UK is less densely populated than other European countries, but we do live in overcrowded conurbations while devoting a massive share of our land to agriculture. As a result, our cities are becoming less attractive as we densify existing settlements in order to save our abundant supply of green fields.

Nor are rising house prices the boon they appear, benefiting only a small minority (older homeowners trading down). For others, rising prices prevent them from buying or renting accommodation of a similar size and quality to that which their parents could afford. This has a macroeconomic impact too, as constraints on the supply of housing accentuate the instability of the economy and make Britain a less attractive place to do business.

Key Facts

  • According to a 2005 MORI poll, 95 per cent of people would prefer to live in a house of some kind. Yet in 2004 one half of all new dwellings built were flats.
  • Only 8 per cent of land in Britain is urban, half the figure in the Netherlands and also less than Belgium, Germany and Denmark.
  • 78 per cent of UK land is used for agriculture, compared to an EU average of 64.2 per cent.
  • In the last 32 years the number of households has risen by one-third, outstripping the growth in the housing stock.
  • Low rise, low density housing is better for the environment than monocultural farmland.
  • Only an estimated 14 per cent of the houses we need could be built on brown field sites.
  • Far from having lots of vacant buildings, our vacancy rate is very low by international standards.

From the Publisher

Commenting on the report, Nicholas Boles, Director of Policy Exchange, said:

“This report firmly establishes that the price of our rigid planning laws is some of the smallest, pokiest and most expensive homes in Europe. It is up to the voters to decide whether they are happy to pay this price, but they deserve to know the truth.”

From the Author

Dr Oliver Marc Hartwich: “Central planning has failed wherever it was tried. The way that housing is planned in England is no exception to this rule.”

From the back cover

Britain’s Soviet-style planning system means that we live in some of the smallest, oldest and costliest homes in the developed world. But is this the housing we want?

Unaffordable Housing is the first of a three-part series of pamphlets investigating the causes of, and solutions to, Britain’s housing shortage. Alan W. Evans and Oliver Marc Hartwich ask how Britain’s housing has become the laughing stock of Western Europe.

The key finding of Unaffordable Housing is clear. The British culture of centrally-planned development – a system established by the 1947 Town and Country Planning Act and embraced to this day by politicians of all parties – has resulted in a woeful shortage of affordable, desirable, high-quality housing.

It also tackles the myths that have protected the current system of central government planning for too long. It shows that:

  • Britain is not overcrowded. The share of land in Britain that is urban is lower than in the Netherlands, Belgium, Denmark and Germany. It is true that our cities are dense and crowded, but central planning has been the cause and it will not provide the solution.
  • Britain has a shortage of desirable housing. The number of households has risen as modern family units fragment. This has caused a massive increase in the demand for housing, which has not been met by a corresponding increase in supply.
  • Cities need not damage the environment. Low-rise, low-density housing is better for biodiversity than the blend of monocultural farmland and high-rise, high-density urban housing favoured by planners and guardians of the countryside.

The price of Britain’s green and pleasant land (and we still have a great deal of it) is expensive houses, small and old homes, and densely-packed, high-rise urban housing. Whether it is too high a price to pay is up to voters, but they deserve to know the truth.

About the Authors

Alan W. Evans is Professor Emeritus and Director of the Centre for Spatial and Real Estate Economics at the University of Reading Business School. He is the author of ‘The Economics of Residential Location’ (1973), ‘Urban Economics’ (1985) and ‘No Room! No Room!’ (1988). He was co-editor of ‘Public Economics and the Quality of Life’ (1977) and ‘The Inner City: Employment and Industry’ (1980), and has published extensively in urban and land economics. His most recent books are ‘Economics, Real Estate and the Supply of Land’ and ‘Economics and Land Use Planning’ both published by Blackwells in 2004. He has also carried out consultancy for the House Builders Federation, Ove Arup, Pro Svi (Milan), Hong Kong Centre for Economic Research, and others.

Dr Oliver Marc Hartwich is a Research Fellow at Policy Exchange carrying out research on planning and housing policy in Britain. He was born in 1975 and studied Business Administration and Economics at Bochum University (Germany). After graduating with a Master’s Degree, he completed a PhD in Law at the universities of Bochum and Sydney (Australia) while working as a Researcher at the Institute of Commercial Law of Bonn University (Germany). Having published his award-winning thesis ‘Wettbewerb, Werbung und Recht’ with Herbert Utz Verlag (Munich) in March 2004, he moved to London to support Lord Matthew Oakeshott of Seagrove Bay during the process of the Pensions Bill.

Excerpted from Unaffordable Housing: Fables & Myths by Alan W. Evans, Oliver Marc Hartwich.

A fable: The Car and Lorry Planning Act of 1948

The new Labour government which came to power in 1945 set about creating a democratic socialist state in which the economy was properly planned rather than left to the vagaries of the market. Many industries were nationalised: coal, rail, gas, electricity, steel and, in 1947, a Town and Country Planning Act was passed. Since towns were now to be properly planned, and other means of transport were now publicly owned and properly controlled, it was argued that the production and distribution of motor vehicles should also be planned and controlled, and this was achieved with the Car and Lorry Planning Act of 1948.

The Act set up a system under which the production of cars was planned on the basis of past ownership patterns and no more than this number were allowed to be produced. No vehicles were allowed to be imported, and anyone wishing to order a new car had to wait until a manufacturer had obtained ‘production permission’ from the local authority on their behalf. The application was considered by the local transport planners and by the local transport planning committee that could refuse or grant permission. To make the system democratic people could write in to say why someone shouldn’t get permission. Often of course the objection was based on the fact that the objector didn’t have a car and didn’t see why his neighbour should have one. Such people were called NIDDIES from the acronym NIDHI (Not If I Don’t Have It).

As incomes rose and the population increased the demand for cars increased but the number of cars permitted to be produced did not increase to the same extent. For it was felt that allowing more cars would create unfair competition for bus and rail.

So the price of cars rose substantially. It was argued by some that this was because of the constraint on production but the transport planners thought that this was not so. The constraint on production did not affect the price; the increase in price was solely caused by the increase in demand caused by things like lower interest rates, so they said. And anyway car prices were not their concern. They were concerned with the real economy. It was for them to plan and for the market to follow.

People adjusted to the situation of course. They drove their old cars as long as possible. Indeed it was rare for a car in Britain to be scrapped if there was any possibility that it could be repaired. After road accidents cars were reconstructed which would have been written off as scrap elsewhere. Tourists visiting Britain were often overwhelmed with nostalgia when they discovered car models they had not seen for years in their own countries.

They also adjusted to the increase in the price of cars. People who had cars discovered that far from depreciating in value the price actually increased over time. This increased the demand further as people without a car felt that they had to get a foot on the ownership ladder. Banks were willing to lend money on the security of the vehicle. Of course as car prices rose people who wanted to buy cars found that they could not afford anything very large and so the cars built and sold in Britain became much smaller than elsewhere. The transport planners said that this showed that small cars were what people wanted in Britain. The British were different from foreigners who wanted large cars. And indeed people had so much invested in their cars that they resisted any relaxation in the control of production because this would result in their cars losing value.

The justification for this came to be that the limitation of car production was in the interests of global sustainability, to reduce pollution and fuel usage. Some economists said that the stock of old cars in Britain polluted far more and were far less fuel efficient than the newer cars used elsewhere. But these critics were ignored, because after all, they were merely economists and what did they know…