The Housing Crisis

Population growth has clearly led to an increase in demand for housing.  One would hope that this increase in demand would be met by an increase in supply, as house builders stepped up construction to take advantage of the commercial opportunities offered by the increase in the number of customers for their products.  There would seem, though, to be certain obstacles to this market mechanism working adequately e.g. a lack of suitable building land, uncertainty over future demand and returns, and a shortage of capacity in the construction industry.

All possible measures should be taken to make brownfield sites available to house builders, but it seems unlikely that this approach alone will provide sufficient land for the construction of housing.  This brings into play the use of greenfield sites with all the difficulties that arise over community objections and the obtaining of planning permission.  Given the extent of the housing crisis and its negative impact on young people and the economy, fairly drastic measures are warranted to streamline the planning application process and to reduce the ability of local communities and authorities to obstruct house building proposals.

In particular, the housing restrictions on greenbelt land around major cities should be reduced or removed.  The effect of these restrictions is to push commuters further away from cities, thus increasing the transport and environmental costs of commuting.  Greenbelt land would be extremely attractive to house builders and the release of this land should provide a major boost to the construction of housing.

These and other measures (increases in social housing, extra apprenticeships in the construction industry etc) may, though, still not allow the supply of housing to equal the increase in demand.  Thought should also, therefore, be given to reducing the demand for housing.  A reduction in immigration may have that effect, but at considerable economic cost if the skills and labour of migrants were to be foregone.

Another approach to reducing demand would be to increase the occupation intensity of current housing. This is, no doubt, already happening to some extent as increasing numbers of young people are forced to remain in the parental home for longer periods due to the lack of affordable housing – but this is simply a symptom of the demand for housing not being met.  A real reduction in demand could come about by removing the single person’s 25% discount on Council Tax i.e. to make the Council Tax fully a property tax that is levied regardless of the number of people in the property.  This would provide a significant financial incentive to share properties and so increase the occupation intensity of our existing housing stock.  The removal of the discount would need to be phased so as to allow people time to adjust their finances and their choices over housing; but even the prospect of its removal should start to have a beneficial impact on the housing situation in the near future.

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