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Think tank: Institute of Economic Affairs

Author(s): Kristian Niemietz

April 11, 2024

This report from UK think tank the Institute of Economic Affairs discusses a future scenario where Britain has solved its housing crisis.

This paper is written in the style of a report from the future (the year 2035), or more precisely, from a possible future, in which Britain has successfully solved its housing crisis. Looking ‘back’, it tells the story of how this happened, and what the consequences were.

It starts with a ‘recap’ of the ‘bad old days’ before Britain’s housing revolution (describing what is, from our perspective, the present). This is a situation of a severe housing shortage. Britain has a much lower level of housing supply than comparable countries. Catching up with the EU average in terms of the number of housing units per 100,000 inhabitants would require the construction of 3.4 million additional homes in England alone.

Britain does not just have fewer housing units than comparable countries, but also has unusually small ones. The average British house has only two thirds of the floorspace of the average Dutch, German, Belgian or French house, and less than half of the floorspace of the average North American, Australian or New Zealand house.

Median house prices in England stand at more than eight times the median annual full-time salary before taxes. Private sector rents in UK cities are far higher than in comparable cities elsewhere, and even though the social housing sector accounts for almost 17% of the UK housing stock (more than double the EU average and the OECD average), more than a million households are stuck on social housing waiting lists.

Britain’s housing crisis is not just a problem for those directly affected by it; it makes the country as a whole poorer, in multiple ways. It leads to higher consumer prices across the board, it reduces labour mobility and productivity, it undermines work incentives, it comes at a high fiscal cost, and it introduces macroeconomic instability.

Last but not least, it drives political polarisation, especially along generational lines. It has not always been this way. From the mid-19th century until the outbreak of World War II, the British housing stock used to grow by 1% to 2% per year, and housing affordability used to improve steadily. It was the adoption of a new, more restrictive planning system in 1947, and the subsequent formation of organised resistance to development (NIMBYism), which slowed down housebuilding, eventually leading to declining housing affordability.

This paper describes how, after 2024, a future ‘YIMBY’ government decides to grasp the nettle, take on the NIMBYs, and accelerate housebuilding. It does so by, for example, selectively releasing greenbelt land around commuter stations, granting planning permission on golf courses, introducing Street Votes, building New Towns, and localising the tax system, so that communities benefit from development, and start competing for taxpayers.

While the description of what happens afterwards is necessarily somewhat speculative (it is, after all, a hypothetical scenario), it is not plucked out of thin air. It is based on a range of empirical literature which analyses housing and planning around the world. On the basis of that literature, it is safe to say that this hypothetical future ‘YIMBY Britain’ would be a much richer country than the Britain we currently live in, or, for that matter, the Britain we will live in if we remain on the present policy trajectory. It will be a country with far higher housebuilding rates, lower house prices, lower rents, shorter waiting times for social housing, less poverty, less homelessness, lower consumer prices, greater labour mobility, better work incentives, lower fiscal costs, higher rates of business investment, greater macroeconomic stability, and higher productivity.

It is also safe to say that a post-housing-crisis Britain would still be a largely ‘green and pleasant land’. Even in the South East of England (outside of London), only about 10% of the landmass is developed. Even if we had a complete housing free-for-all (which is not what this paper advocates), there is no chance whatsoever of the English countryside being ‘concreted over’.