The way out of the housing crisis

Local planning, local tax autonomy

The empirical evidence from around the world is as clear as it gets: In the long run, housing costs are mostly determined by the severity of planning restrictions (see here, pp. 17-19). Those who are emotionally attached to the British planning system try their best not to see this connection by looking for explanations, however implausible, outside of the planning system. What they do not realise is that most of the research tests alternative explanations, and carefully controls for a wide range of other potential factors. But the bottom line is that other factors, while not irrelevant, are ultimately sideshows when looking at a sufficiently long period. The first and foremost reason why housing is so expensive in the UK is that the planning system does not allow enough homes to be built. We only need to look at the number of dwellings completed over the past thirty years, and compare it to any other country for which data is available (p. 14).

But if planning restrictions drive house prices – what is it that drives planning restrictions? Or in other words, why would the electorate deliberately and permanently deprive itself of housing space?

Part of the answer is that while restrictive planning is damaging on the whole, some people do benefit, and the benefits are concentrated and tangible. For landlords as well as homeowners living close to undeveloped land, the benefits of planning restrictions are obvious: The former can charge much higher rents than they otherwise could, and the latter enjoy greater housing wealth and open space nearby. Less intuitively, corporate developers can also be counted among the beneficiaries. The system raises the fixed costs of development, leading to a heavily concentrated market structure dominated big players. In most of continental Europe, corporate developers play a much smaller role than in the UK.

Meanwhile, the cost of the system is much more dispersed and opaque. The result of this asymmetry is that the beneficiaries of planning restrictions are much more likely to be politically organised, and voice their interest in the political arena. Organisations like the Council to Protect Rural England can always be counted on to be active on the anti-development side. But there is no obvious lobby representing those who cannot get a foot on the housing ladder, those who struggle with high rents, or those who are trapped in social housing. Not to mention those who are stuck in the endless waiting lists.

Some of those frustrated with the current system have resorted to attacking ‘nimbys’ as selfish snobs, but what we have to realise is that the current system makes nimbyism entirely rational. In principle, development brings costs as well as benefits to a community. Yes, it is a nuisance to residents, and it does lead to a loss of open space. But it also enlarges the local tax basis, which could enable either better local public services, or lower local taxes. The key problem is that the tax structure in the UK has become so overly centralised that this latter consideration plays virtually no role at all anymore. Local tax revenue in the UK represents a risible 1.7% of GDP. For comparison: Even in France, which has traditionally been considered the textbook model of super-centralised governance, the share is 5.2%.  

What this means is that the downsides of development are felt by local people, while the advantages of development are collectivised at the national level. Should we be surprised if people act ‘nimbyistic’ under these conditions?

The way out of the housing affordability crisis is to get the incentive structure right. Local authorities should become self-funding. They should finance their own expenditure from locally raised taxes, be it a local income tax, a local property tax, or whatever they see fit. They should then also obtain full control over planning decisions in their surrounding. Local residents would finally be able to reap the benefits from development, instead of just bearing the cost. Nimbysim would not disappear, but it would greatly reduce, because it would simply become too expensive to be nimbyist.

Photograph: Getty Images

Kristian Niemietz joined the IEA in 2008 as Poverty Research Fellow.

Kristian is currently a PhD student in Public Policy at King's College London, where he also teaches economics. He is the author of the recent IEA Discussion Paper on planning reform, Abundance of Land, Shortage of Housing.

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The allegations of abuse in sport are serious – but we must guard against hysteria

This week in the media, from Castro and the student rebels, hysteria over football coaches, and Ed Balls’s ballroom exit.

From the left’s point of view, the best that can be said of Fidel Castro, who has died at 90, is that – to echo Franklin D Roosevelt on the Nicaraguan dictator Anatasio Somoza – he may have been a son of a bitch but he was our son of a bitch. Denying Castro’s dreadful record on human rights is pointless. According to the highest estimates – which include those who perished while trying to flee the regime – the death toll during Castro’s 49 years in charge was roughly 70,000. His immediate predecessor, Fulgencio Batista, whom Castro overthrew, murdered, again according to the highest estimates, 20,000 but he ruled for a mere seven years. For both men, you can find considerably lower figures, sometimes in the hundreds. It depends on the politics of the estimator, which shows the absurdity of such reckoning.

 

Murder is murder

What is certain is that Batista ran a corrupt regime with close links to the American Mafia and presided over outrageous inequalities. Even President Kennedy, who ­approved a failed military invasion of Cuba in 1960, said that, on Batista’s record, “I am in agreement with the first Cuban revolutionaries”. Castro, on the other hand, created a far more equal society where illiteracy was almost wiped out, and free health care brought life expectancy up to levels comparable to those in the US and western Europe. You could say that the numbers saved from early deaths by Cuban medicine under Castro easily exceeded the numbers that faced firing squads.

But nothing excuses torture, murder and political imprisonment. There isn’t a celestial balance sheet that weighs atrocities against either the freedoms from ignorance and disease that the left favours or the freedoms to make money and hold private property that the right prefers. We should argue, as people always will, about which freedoms matter most. We should be united in condemning large-scale state brutality whatever its source.

 

Spirit of ʼ68

Though his regime became an ally (or, more precisely, a client) of the Soviet Union, Castro wasn’t a communist and he didn’t lead a communist uprising. This point is crucial to understanding his attraction to the mostly middle-class student rebels in Europe and America who became known as the ’68ers.

To them, communist rulers in eastern European were as uninspiring as the cautious centrists who hogged power in Western democracies. They were all grey men in suits. Castro had led a guerrilla army and wore battle fatigues. As the French writer Régis Debray explained in Revolution in the Revolution? – a book revered among the students – Castro’s band of revolutionaries didn’t start with a political programme; they developed one during “the struggle”. Their ideology grew organically in the mountains of Cuba’s Sierra Maestra.

This do-it-yourself approach seemed liberating to idealistic young people who didn’t want to bother with the tedious mechanics of bourgeois democracy or the dreary texts of Marxism-Leninism. They had permission for “direct action” whenever they felt like it without needing to ­formulate aims and objectives. They couldn’t, unfortunately, see their way to forming a guerrilla army in the Scottish Highlands or the Brecon Beacons but they could occupy a university refectory or two in Colchester or Coventry.

 

Caution over coaches

Commenting on Radio 5 Live on the case of Barry Bennell, the Crewe Alexandra coach convicted in 1998 of sexual offences against boys aged nine to 15 (the case came to fresh attention because several former professional football players went public about the abuse), an academic said that 5 per cent of boys reported being sexually abused in sport. “That’s one boy on every football pitch, every cricket pitch, every rugby pitch in the country,” he added.

This is precisely the kind of statement that turns perfectly reasonable concerns about inadequate vigilance into public hysteria. The figure comes from an online survey carried out in 2011 by the University of Edinburgh for the NSPCC. The sample of 6,000 was self-selected from emails to 250,000 students aged 18 to 22, who were asked about their experiences of physical, emotional and sexual harm in sport while aged 16 or under. “We do not make claims for the representativeness of our sample,” the researchers state.

Even if 5 per cent is accurate, the suggestion that abusers stalk every playing field in the land is preposterous. After the Jimmy Savile revelations, just about every DJ from the 1960s and 1970s fell under suspicion – along with other prominent figures, including ex-PMs – and some were wrongly arrested. Let’s hope something similar doesn’t happen to football coaches.

 

Shut up, Tony

Brexit “can be stopped”, Tony Blair told this magazine last week. No doubt it can, but I do wish Blair and other prominent Remain supporters would shut up about it. The Brexiteers have spent 20 years presenting themselves as victims of an elite conspiracy to silence them. Committed to this image, they cannot now behave with the grace usually expected of winners. Rather, they must behave as though convinced that the prize will shortly be snatched from them, and treat any statement from Remainers, no matter how innocuous, with suspicion and resentment. Given enough rope, they will, one can reasonably hope, eventually hang themselves.

 

Strictly Balls

Perhaps, however, Nigel Farage et al are justified in their paranoia. As I observed here last week, the viewers of Strictly Come Dancing, in the spirit of voters who backed Brexit and Donald Trump, struck more blows against elite experts by keeping Ed Balls in the competition even after judges gave him abysmal ratings. Now it is all over. The BBC contrived a “dance-off” in which only the judges’ votes counted. 

Peter Wilby was editor of the Independent on Sunday from 1995 to 1996 and of the New Statesman from 1998 to 2005. He writes the weekly First Thoughts column for the NS.

This article first appeared in the 01 December 2016 issue of the New Statesman, Age of outrage