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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A glossary of football’s most hackneyed phrases – and what they mean

This is the time of the season when we all get tired. Time to break out the cliches.

This is the time of the season when we all get tired. The players, poor petals, are exhausted. The refs have had enough of being shouted at. The hot-dog sellers are running out of hot dogs. And the TV commentators, bless ’em, are running out of clichés. So, between now and the end, look out for the following tired old phrases, well-worn adjectives and hackneyed descriptions, and do feel sorry for them. They know not what they are doing.

It will go right to the wire. In the case of the Prem, this isn’t even true. Leicester are as good as there. It is only true of the Championship, where three teams – Burnley, Middlesbrough and Brighton – are on 87 points each, with the fourth team miles away. Now that will go to the wire. The phrase comes from those pre-war reporters in the US who telegraphed their copy. When it didn’t get through, or they’d never filed it, being too lazy or too drunk, they would blame the technology and say, “It’s down to the wire.”

Dead men walking. This is when the pundits decide to hold a seance in the studio, taking advantage of Alan Shearer having sent us all to sleep. It also refers to Pellegrini of Man City and Hiddink of Chelsea. They have known for ages they’re dead parrots, not long for this life, with their successors lined up even while their bodies are still warm. I think a moment of silence is called for. “Dead men walking” refers only to football. Must not be used in connection with other activities, such as media. When someone is sacked on a newspaper, they immediately get sent home on gardening leave, just in case they manage to introduce a spot of subversion into the classified ads, such as: “Five underpants carefully kept; make up; red dungarees; offers considered, Kent.” (The first letters of each word give it away, tee hee.)

World class. The number-one phrase when they can’t think of any other synonyms for what was quite good. As well as goals, you now hear of world-class throw-ins, world-class goal kicks, world-class haircuts
and world-class pies in the press room at half-time, yum yum.

He’s got a hell of a left peg. That’s because he borrowed it from his mam when she was hanging out the washing.

He’s got it in his locker. The fool. Why did he leave his left peg there? No wonder he keeps falling over.

And the sub is stripped off, ready to come on. So it’s naked football now, is it?

Old-fashioned defending. There’s a whole lexicon to describe brutal tackles in which the defender kicks someone up in the air, straight to A&E.

Doing the dirty work/putting himself about/an agricultural tackle/left his calling card. Alternative clichés that every commentator has in his locker for when yet another world-class, manic, nasty, desperate physical assault is committed by a player at Sunderland, Newcastle and Norwich, currently scared shitless about going down and losing their three Bentleys.

Opened up his body. This is when an operation takes place on the field, such as open-heart surgery, to work out whether any Aston Villa player has got one. OK – it is, in fact, one of the weary commentator’s nicer compliments. He can’t actually describe what the striker did, as it was so quick, so clever, and he totally missed it, but he must have done something with his body, surely. Which isn’t even correct, either. You shoot with your feet.

Very much so. This is a period phrase, as popularised by Sir Alf Ramsey. He got it into his head he must talk proper, sound solemn, or at least like a trade union leader of the times, so instead of saying “yes” he would say “very much so”. It’s having a comeback. Listen to Glen Hoddle – I guarantee that between now and the end of the season he’ll say it ten times, whenever someone has interrupted and he wants to get back to the aperçu he was about to share with us.

Most unpredictable Premier season ever. Or so Sky is telling us, on the hour, meaning “since last season”, which was the most unpredictable one since, er, the season before that.

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 28 April 2016 issue of the New Statesman, The new fascism