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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Why I'll miss Sean Spicer, the tragic hero who couldn't cope with Trump

He was all of us when we have a sociopath for a boss.

From the first day he walked up to the White House press podium, in his ill fitting suit like an intern on his first day in the office, my heart went out to Sean Spicer. He did that classic thing you do when you have a very strong brief from your new boss and no idea what you're doing. He went completely overboard. Donald Trump’s inauguration crowd wasn't only huge, contrary to actual photo, video and eye witness reports, it was exceptionally huge. In fact, it was the biggest in history. Period!

We all had the same thought. This guy? This is who you pick to be White House press secretary? He crashed on to the scene all stutters and swivel eyes and redundant suit material. It was a fitting debut for the Trump’s administration.  

It was the start of a show that would give us Sean Spicer’s ABCs, a montage that poked fun at his tendency to mispronounce words and foreign leaders’ names. His greatest hits include saying "sometimes we can disagree with the facts". He brought on to the stage two piles of paper, one large and one small, pointing to the larger one as evidence of what "big government does", like he was on Sesame Street showing the kids the difference between BIG and SMALL. He said even "someone as despicable as Hitler didn’t sink to using chemical weapons". Just face palm, head-desk stuff everyday. His press briefings descended into laughter from the press and cries "oh come on Sean. Sean??" as he stormed off in the middle of a briefing.

But somehow, you couldn’t get mad at him. Or mad enough. Sean Spicer is that man who collapses late into the meeting he is supposed to be leading, sweating, nervous, spilt coffee down his tie and a distinct air of having stress-induced heartburn, before overcompensating for it by talking over everyone and throwing his weight around. More than anything, Spicer just seemed scared. His bursts of irritation and anger masking a deep seated sense of inadequacy probably much exacerbated by Trump reportedly chewing him out everytime he didn't come across as slick enough.  

Despite working for a dishonest and dissembling White House, Spicer never felt like the actual bully. He was the bullied. The kid who wanted in with the big boys and did their bidding but actually wasn't that bad inside so never did it with much effect. Indeed, he was all of us when we have a sociopath for a boss, a recent promotion, and a mortgage. All of us when just trying to get through the day when we don’t believe what we’re selling and are crippled by impostor syndrome. He was a tragic hero. Someone who just wanted to be taken seriously but somehow had missed out on all the genes that would enable that. The man who shoveled elephant excrement at the Big Top but stuck with it because he wanted to work in show business. A modern day clown who hated people laughing at him and cried after the show. And then there was Melissa McCarthy’s Saturday Night Live rendition which drove the final nail in the coffin of his hope to ever develop any gravitas. But it was as affectionate as it was brutal.

None of this excuses any of his complicity of course. I over embellish for effect. He went out there and lied day in and day out, but as his tenure went on, his suits got better, but one felt that he wasn’t coping. People who could work for Donald Trump and not have a nervous breakdown probably fall into two camps; those who agree with him and all his tactics, and those who don’t but are careerists. To be in the latter and be able to sleep at night requires a pretty high functioning ability to compartmentalise and, let’s be honest - kill your soul.

In a recent interview, Tom Ricks, the veteran journalist said:

"It's a crushing burden to be in political power in Washington these days, and you see people almost lose their souls. I think Sean Spicer, the president's spokesman in recent weeks has been pushed almost to the edge of a nervous breakdown from his public appearance. And he's kind of lost a big part of his soul, and I think that's true of some other people. And watching H.R. McMaster, an officer I do admire, over the last few weeks, I feel like I've seen him come out and give up a slice of his soul a few times. And I wonder how many more times he can do that before he just says I am becoming part of the problem, not part of the solution here."

That’s what it felt Spicer was doing everytime he came on. Giving up a slice of his soul. This might be a charitable explanation and he’s just really bad at his job. But when Sarah Huckabee Sanders began job sharing with him, it looked like her relative competence was less attributable to the fact that she was a better press secretary, and more that she was a soulless stone cold liar who felt no dissonance.

As Anthony Scaramucci came onto the podium to accept his position as White House Communications Director, the appointment that Spicer allegedly resigned over, it was clear that it could get a lot worse than Spicer. Scaramucci put on a sickening display where he said he "loved" and was "loyal" to the president about ten times, as Huckabee, now fully wearing the late Sean Spicer’s shoes as White House Press Secretary, looked on dead-eyed from the sidelines.

Sean Spicer still has a chance to completely blacken his name and lose any fondness he may have fostered by leaving the White House, joining the cable TV circuit  and continuing to shill for the Trump administration. This is a highly probably scenario. But until then, here’s to Sean Spicer. You were the best White House press secretary ever. Period!