Planning has failed the housing sector in Britain says new report
The current housing crisis in the UK is a failure of politics not markets and is the result of restrictive planning laws and radical reform is needed to mend it, according to a new analysis.
A paper by leading British architect Patrik Schumacher for think tank the Adam Smith Institute argues that restrictive planning laws have led to an increase in house price to earnings ratio in places like London.
He writes that instead of populist state led solutions, the housing crisis can only be fixed effectively through the denationalisation and depoliticisation of development rights in general and in the radical liberalisation of housing in particular.
The report says that London’s house prices have gone from four times to over 10 times the average annual wage over the past two decades. Meanwhile the average renter has gone from spending one fifth of their income each year on rent to spending over a third.
But it says that the Government should resist calls to impose rent controls or mandatory long term tenancies as they reduce supply and hamper labour mobility and it hits out at initiatives like those from London Mayor Sadiq Khan for up to 50% of developments to be affordable. Schumacher argues that this will discourage development and push up prices elsewhere.
Affordable housing requirements act as a tax on new development, according to the analysis. Schumacher argues this creates a vicious cycle as developments are disapproved, disrupted or abandoned, and other plots on sites are hiked in price to reflect politically imposed rationing.
‘Urban development and housing provision have been unduly politicised and thereby paralyzed. We should be experiencing an urban Renaissance as a crucial productivity boosting component of our knowledge-and network society,’ said Schumacher.
‘Instead planning restrictions and imposed standards block the adequate supply of urban residences leading to prohibitive prices. Paradoxically, the affordability system contributes to rather than alleviates the affordability crisis,’ he added.
According to Sam Dumitriu, head of research at the Adam Smith Institute, there is a growing consensus that the current planning system is not fit for purpose. ‘Restrictive planning systems are pricing people out of the places where they are most productive and redistributing wealth upwards. This situation is crying out for change, so it is great to see a leading architect call for a capitalist revolution in housebuilding,’ Dumitriu explained.
Younger people trying to get on the housing ladder need to be aware that it is the planning system that is holding things back, said Sophie Jarvis, a research associate at the Adam Smith Institute.
‘Millennials already know that they are at a massive disadvantage to their parents in terms of getting on the housing ladder. What they don’t know is that rent caps and restrictive planning laws are holding them back, not helping them out,’ she pointed out.
‘Liberalising planning laws, however, could get them on that ladder. The best example of this is if developers were allowed to build smaller houses, millennials could live in a compact, ergonomic flat in Zone 1 or 2, instead of a rundown, cold flat in at the end of the Central line or half way to Hull,’ she concluded.