In an intriguing article, Guardian columnist and National Trust chairman Sir Simon Jenkins says there is no housing crisis, implying it is all a figment of the media class’s imagination. It is intriguing because he states many unpopular truths yet simultaneously misses the point in a spectacular fashion in some of his other statements.
He rightly ridicules the national nature of the housing crisis, the notion that buy-to-let is evil and that there is or should be a right to live in a specific area simply because your parents did. However, his central claim that there is no housing crisis is ridiculous, for reasons which Sam Bowman eruditely explained in his blog at the Adam Smith Institute.
There are, however, a few very good points which Sir Simon makes which echo what we have said at the TaxPayers’ Alliance:
1. The green belt is (partly) obsolete
You don’t have to want to abolish the green belt to see that while it may have been appropriate in 1947 for a city that was de-populating and fading, a blanket ban pushing sprawl over the green belt to “exurbs” on the other side helps nobody.
2. Taller buildings are needed
Sir Simon is right that most people don’t want to live in towers. But many love the idea of having commanding views over their city and living right in the centre of things, which explains why people are prepared to pay astronomical sums to live in them in the few places where they are permitted. But more fundamentally, taller buildings need not mean towers, just taller than the status quo. As he says permitting “an extra storey, apartment or back extension on every existing property would drastically increase density and capacity.” Planning law has effectively frozen building heights at whatever level they are now, with a few exceptions. When demand is high, we can’t just build a storey or two higher than the neighbours, like they used to before the War. But if we allowed this it would absorb much of the pent-up demand that currently manifests itself in demand for towers and greenfield development. Neighbours might not like it, but what’s the alternative? An ever worsening crisis?
3. Taxes are a problem
Stamp Duty is acting as a substantial disincentive against market mechanisms redistributing homes from those who don’t need them (typically older people whose children have left home) to those who do, which is contributing to the shortage and forcing up prices in the process.
4. Housing benefit is better than social housing
Soaring Housing Benefit bills are scandalous, and were particularly so before the benefit cap came into effect. But they are transparent. If expensive homes were owned by local authorities and let out at pretend rents that don’t reflect their actual value (what economists call “opportunity cost”), that would be no less scandalous because the value of the subsidy would just be hidden. At least with Housing Benefit an expensive rent is acknowledged because it’s procured in the open market. Extortionate rents are the symptom of our dysfunctional housing market. The cause is our too strict planning system.
As part of our major review of spending in April, our Spending Plan recommended how the Government might reduce Housing Benefit bill by reforming planning restrictions. As the housing crisis becomes ever more prominent, a practical but meaningful reform like ours which would preserve the bulk of the green belt and remove much of the demand for towers seems ever more pressing.