To fix the housing market, the government needs to do nothing at all

Just stop trying.

In November, planning minister Nick Boles tackled the country's housing crisis — caused, he said, by a decade-long invasion of propertyless aliens — head-on, announcing he would seek powers to build 100,000 homes a year on Green Belt land. Shortly afterwards, Theresa May, the Home Secretary, reinforced this message, warning us of the imminent danger that migrant homebuyers pose to the “national interest” – "without the demand caused by mass immigration," she said, "house prices could be ten per cent lower over a twenty year period."

The Conservative grassroots, mortified at what they apparently see as the sheer illiberality of building on the Green Belt, moved swiftly to an ostrich position to undermine the proposal.

"The notion of a housing shortage in London… is, and always has been, a myth," read Andrew Lilico's riposte. "Surpluses of dwellings over households actually increased everywhere".

It is almost impossible to be more wrong. The immigration argument has been debunked so comprehensively that, in its 2012 report on the housing shortage (pdf), the IEA casually dismisses it as an "oft-repeated non-issue". Similarly, the effort to use simple mathematics to describe a notoriously variegated and illiquid asset class ignores the fact that neither property nor its occupants are homogenous and freely exchangeable: an abundance of one- or two-bedroom flats in a given area at a range of prices, for example, is useless if the majority of demand is for family homes (pdf).

There is, in fact, a fairly robust consensus across the political spectrum that the United Kingdom is in the grip of an acute housing supply shortage with many causes, among them NIMBYism, speculation, capital flight from southern Europe, over-taxation, land use controls, and failure to implement comprehensive welfare reform. In the absence of a credible policy proposal from the Coalition, however, the left has assumed the mantle of leadership on the issue by setting itself in diametrical opposition to austerity, demanding more central government funding for affordable housing – and lots of it.

Unquestionably, the money could be put to good use. Shelter, the housing charity, predicted in 2010 that (pdf):

"cuts to housing benefit and the slashing of the affordable house building subsidy will be devastating for the housing aspirations of thousands of young people consigned to increasing costs."

Those costs are the third-highest in Europe, 40 per cent of net income for over 15 per cent of the population. Sensing the undercurrent of popular anger, Labour has promised funding for the same 100,000 homes a year as Nick Boles – except these are “affordable” ones. Unfortunately, these counterproposals only draw battle-lines for the next election. They address the question of how taxpayers should step in to reinforce the safety net, but do nothing to tell us how to rein in the cost of the safety net itself.

The key question is this: would building more “affordable housing”, either in the Green Belt or in our cities, actually end the housing crisis? In my view, probably not. Housing was a risky enough business before the recession; today, with scarce financing, high material costs, narrow profit margins, and downward pressure on public finances for the next decade at least (£), developers face additional disincentives. If anything, affordable housing prevents developers from meeting market demand while concurrently increasing their costs — and as such it has become a significant part of the supply problem.

Many English councils mandate that developers designate a certain proportion of units in any new construction as "affordable," i.e. earmarked for social tenants or a social housing provider. Taking the London borough of Newham as an example, that locality aims to provide "the maximum reasonable amount of affordable housing when negotiating on (the approval of) individual private residential and mixed use schemes". By “reasonable,” however, Newham means 50 per cent of the total, with the affordable component supported mostly by government subsidies.

This has serious implications on any proposed scheme's economic viability. Without government grants, affordable housing in Newham is completely uneconomic at the 50 per cent target (pdf) and remains so even at lower targets, for example with 35 per cent or 25 per cent provision. Viability is further impaired where build cost per square metre rises (as occurs when a development is denser) or sale price per square metre falls (meaning the proposed unit would be affordable in a free market). To wit, the economic viability of housing schemes in England is low if you intend to build units that constitute ordinary working- and middle-class housing in most of the English-speaking world, because local planning policies force developers to only embark on those projects which realise relatively higher marginal returns and command a higher market price.

This is a fact of which local governments around the country are aware (pdf); Newham's viability assessment, for example, points out that "50% affordable housing is unlikely to be viable in all market conditions", and that "in some circumstances... sales values would need to increase beyond the 2007 peak for 50% affordable housing to be achievable."

But this is not 2007, and we would be mistaken to believe that the social housing crisis is separable from the supply problem in the wider private markets. British social housing policy is itself heavily reliant on private sector provision; a crisis in one begets a crisis in the other, or as put by the IEA (pdf):

If social housing in Britain is under strain – and it clearly is – it is because the housing market as a whole is under strain.

When we consider that fully 20 per cent of the nation's residential property is directly or indirectly supported by the state and virtually the entire private sector housing supply process — design, location, construction, profit margin, and post-completion tenant allocation — is regulated and made more burdensome by the state, it does not take much to see that virtually all state intervention in the UK housing market should in theory, and does in fact, constrain supply or inflate demand. Certain aspects of the problem arise from pet policies of the right; others, of the left. What they have in common is that they disincentivise new housebuilding while making existing housing more expensive at the same time, to the detriment of low- and middle-income earners, the propertyless and the young.

Neither redistributive taxation nor piecemeal tinkering are well-suited to solve this problem. An iconoclastic, no-holds-barred programme of liberalisation, however, is. Like fuel shortages in the America of the seventies or bread shortages in the USSR of the eighties, the British housing crisis is government-led. If the government is serious about solving it, the first thing it should do is get out of the way.

The Carpenters estate in Newham, London. Photograph: Getty Images

Preston Byrne is a fellow at the Adam Smith Institute.

Show Hide image

OK, let's do this: who REALLY won Legs-It? An exclusive investigation

Look, some of you just aren't treating this question with the seriousness it deserves. 

This morning, the Daily Mail front page dared to look past the minutiae of Brexit - can my EU partner still live here? Why is my holiday so expensive? Should we be worried that David Davis looks like a man who's ended up a minister because he lost a bet? - to ask the really big question. 

Yes, indeed. Who is Top of the Tibia? Who shines in the shin department? Which of these impressive, powerful women has lower limbs which best conform to our arbitrary beauty standards? 

In the accompanying article, Sarah Vine (herself the owner of not one, but TWO lower limbs) wrote that the women put on a show of unity with "two sets of hands clasped calmly on the arms of their respective chairs", disdaining the usual diplomatic practice of accompanying discussions about Article 50 with a solemn, silent re-enactment of the Macarena.

Vine adds: "But what stands out here are the legs – and the vast expanse on show. There is no doubt that both women consider their pins to be the finest weapon in their physical arsenal. Consequently, both have been unsheathed." That's right, people: Theresa May has been unafraid to wear a skirt, rather than a pair of trousers with one leg rolled up like LL Cool J. A departure for Mrs May, to be sure, but these are uncertain times and showing off just one calf might see the stock markets plunge.

The prime minister has come to the bold decision that her legs are the "finest weapons in her physical armoury", when others might argue it's the sharp, retractable venom-filled spurs on her fore-limbs. (Oh wait, my mistake. That's the duck-billed platypus.)

As ever, the bien-pensant left is squawking about sexism and avoiding the real issue: who really won Legs-it? Well, there will be no handwringing over how this is a belittling way to treat two female politicians here, thank you very much. We shall not dwell on the fact that wearing a skirt while doing politics is not really remarkable enough to merit a front page, oh no. Instead, we shall bravely attempt to answer that Very Important Question. 

Who really won Legs-it? 

1. David Cameron

We might not know who won Legs-It, but let's be honest - we all know who lost. David Cameron here has clearly concluded that, much like Andrew Cooper's pre-referendum polling results, his legs are best hidden away while everyone politely pretends they don't exist. 

Legs-It Rating: 2/10

2. Michael Gove

Fun fact: Michael Gove's upper thighs are equipped with sharp, retractable claws, which aid him in knifing political rivals in the back.

Legs-It Rating: 8/10

3. David Davis

Mr Davis's unusually wide stance here suggests that one leg doesn't know what the other is doing. His expression says: this walking business is more difficult than anyone let on, but I mustn't let it show. Bad legs are better than no legs.  

Legs-It Rating: 6/10

4. Boris Johnson

Real talk: these legs don't really support Boris Johnson, they're just pretending they do to advance their career. 

Legs-It Rating: 6/10

5. George Osborne

Take in these long, cool pins. These are just two out of George Osborne's six legs. 

Legs-It Rating: 9/10

6. Liam Fox

In the past, Liam Fox has faced criticism for the way his left leg follows his right leg around on taxpayer-funded foreign trips. But those days are behind him now.

Legs-It Rating: 10/10

7. Nigel Farage

So great are the demands on the former Ukip leader's time these days, that his crotch now has a thriving media career of its own, independent from his trunk and calves. Catch it on Question Time from Huddersfield next month. 

Legs-It Rating: 7/10

Conclusion

After fearlessly looking at nine billion photos of legs in navy trousers, we can emphatically conclude that THEY ARE ALL BASICALLY THE SAME LEG. Life is great as a male politician, isn't it?

I'm a mole, innit.