Housing

The planning system has repercussions that are felt far beyond the housing market. Higher land prices affect every area of life which requires land or has a factor of production which is linked to land, whether it is residential housing, industry, commerce or services. Wherever land is needed, high land prices matter.

What kind of country is England? If you ask the people living here, the answer you are likely to get goes something like this: England is a country on an overcrowded island with ever-further sprawling cities and a countryside that is under constant threat of becoming covered in concrete by rampant development. According to a recent survey, 54 per cent of the respondents believed that at least half of England was developed with one in ten even estimating the development degree to be above 75 per cent. The reality, however, is far away from this perception.

Planning was introduced in 1947 as an attempt to co-ordinate, but also to promote development. Over time, however, its focus shifted to urban containment and it has become a brake on economic growth. It is high time to radically simplify the planning system to unleash the true development potential of the British economy.

WHAT makes a country rich? Reading British newspapers, the impression one could get is that ever-rising property prices contribute a great deal to our economic prosperity. House-price increases are usually reported as a good thing, but this is something that worries us a lot when they stagnate or even fall. But what do high house prices, and indeed high land prices, mean for the economy as a whole?

It is time to change our attitude to high land and house prices. What we should strive for is price stability at the very least. This would strengthen our economic competitiveness, and future generations of first-time buyers will thank us – if national politicians ever have the courage to stop feeding the craving of the middle class for exponentially increasing house prices.

There has recently been much public debate about the introduction of a land value tax. To its supporters such a tax promises to achieve several goals simultaneously. On closer inspection, however, the arguments in favour of land value taxation are not convincing. On the contrary, the economic foundations on which proponents of this tax rely are dubious, and there are significant legal, moral and practical problems with land value taxation.

The British seem to be fixated with house prices and follow the development of the property market like the weather report or the latest football results. Prices have been going up and up in the past, and if annual house price inflation occasionally drops to a mere five or six per cent, one can already hear commentators becoming fearful of a slump.

We believe that implementing both reforms – of the planning system and of local government finance – would make the supply of housing more flexible and deliver the kind of well-designed, spacious, affordable housing in green cities which the citizens of Germany or Switzerland take for granted. We hope that it is not too late to change a system that, to date, has nothing better to boast about than ever-rising house prices.