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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“I felt very lonely”: addressing the untold story of isolation among young mothers

With one in five young mothers lonely “all the time”, it’s time for employers and services to step up.

“Despite having my child with me all the time, I felt very lonely,” says Laura Davies. A member of an advisory panel for the Young Women’s Trust, she had her son age 20. Now, with a new report suggesting that one in five young mums “feels lonely all the time”, she’s sharing her story.

Polling commissioned by the Young Women’s Trust has highlighted the isolation that young motherhood can bring. Of course, getting out and about the same as you did before is never easy once there’s a young child in the picture. For young mothers, however, the situation can be particularly difficult.

According to the report, over a quarter of young mothers leave the house just once a week or less, with some leaving just once a month.

Aside from all the usual challenges – like wrestling a colicky infant into their jacket, or pumping milk for the trip with one hand while making sure no-one is crawling into anything dangerous with the other – young mothers are more likely to suffer from a lack of support network, or to lack the confidence to approach mother-baby groups and other organisations designed to help. In fact, some 68 per cent of young mothers said they had felt unwelcome in a parent and toddler group.

Davies paints what research suggests is a common picture.

“Motherhood had alienated me from my past. While all my friends were off forging a future for themselves, I was under a mountain of baby clothes trying to navigate my new life. Our schedules were different and it became hard to find the time.”

“No one ever tells you that when you have a child you will feel an overwhelming sense of love that you cannot describe, but also an overwhelming sense of loneliness when you realise that your life won’t be the same again.

More than half of 16 to 24-year-olds surveyed said that they felt lonelier since becoming a mother, with more than two-thirds saying they had fewer friends than before. Yet making new friends can be hard, too, especially given the judgement young mothers can face. In fact, 73 per cent of young mothers polled said they’d experienced rudeness or unpleasant behaviour when out with their children in public.

As Davies puts it, “Trying to find mum friends when your self-confidence is at rock bottom is daunting. I found it easier to reach out for support online than meet people face to face. Knowing they couldn’t judge me on my age gave me comfort.”

While online support can help, however, loneliness can still become a problem without friends to visit or a workplace to go to. Many young mothers said they would be pleased to go back to work – and would prefer to earn money rather than rely on benefits. After all, typing some invoices, or getting back on the tills, doesn’t just mean a paycheck – it’s also a change to speak to someone old enough to understand the words “type”, “invoice” and “till”.

As Young Women’s Trust chief executive Dr Carole Easton explains, “More support is needed for young mothers who want to work. This could include mentoring to help ease women’s move back into education or employment.”

But mothers going back to work don’t only have to grapple with childcare arrangements, time management and their own self-confidence – they also have to negotiate with employers. Although the 2003 Employment Act introduced the right for parents of young children to apply to work flexibly, there is no obligation for their employer to agree. (Even though 83 per cent of women surveyed by the Young Women’s Trust said flexible hours would help them find secure work, 26 per cent said they had had a request turned down.)

Dr Easton concludes: “The report recommends access to affordable childcare, better support for young women at job centres and advertising jobs on a flexible, part-time or job share basis by default.”

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland