There is a fascinating analysis of the housing crisis by James Meek in the current issue of the London Review of Books. Much of it is concerned with the ‘bedroom tax’ and changes to the benefit regime, and some readers will not get beyond the first paragraph, with its overly-cynical suggestion that the Government is engaged in a ‘let-the-poor-be-poor crusade, a Campaign for Real Poverty’. But take or leave the leftist polemic, the article is well worth reading, not least because it suggests that the housing crisis is harder to solve and more complex than politicians from any of the major parties would have us believe.
Housing has moved up the political agenda, but the proposed solutions are inadequate to the challenge we face. In particular, Meek dismisses the view that simply releasing more land for development will solve the problem.
He notes that some “believe the aim of Britain’s private housebuilders is to build as many homes as possible, and that they are only prevented from doing so by a cranky planning system”. But, he says, “putting aside land for houses isn’t the same as building them. The historical evidence suggests Britain’s private housebuilders have been driven less by the urge to build the maximum number of new homes than by the urge to make as much (or lose as little) money as possible.”
Much of the article is critical of the volume house builders, and it would be interesting to hear an industry response. The housing market, Meek says, “is failing across the board”. He cites Matt Griffith of the IPPR think tank as arguing that the primary function of the main house builders is no building houses, but dealing in land. “Griffith,” he says, “estimates that British housebuilders have enough land to build 1.5 million houses. This is much higher than most estimates because he includes not only land that has been given planning permission for homes to be built on it but also the shadow land bank: the vast stretches of agricultural land that housebuilders’ canny local agents guess will get planning permission in future, and have tied up through confidential option deals with landowners.”
The land is not built on because “instead of competing to build the most attractive houses, the firms in the private housebuilding oligopoly compete over who can best use their land-banking skills to anticipate the next housing bubble and survive the last one. The whole system incentivises land hoarding and an undersupply of new homes compared to demand, to keep prices high.”
Meek concludes that “making space for everyone in the crowded southern end of an island with a growing population is likely to involve everyone giving up something”. That is certainly true. Several of the people he quotes approvingly support solutions that would put the countryside under even greater threat. Some on the right favour radical liberalisation of the planning system to free up much more land for development and so undermine the power of the main house builders to eke out supply. Solutions on the left might include the compulsory purchase of land, including greenfield land.
But let’s have the debate. At present we are seeing the slow erosion of the countryside (and some urban areas) without any realistic prospect that we will build the number of homes the country needs, let alone homes of good quality built in the right places. Housing policy is a mess, and to an extent the fixation on planning policy is a distraction. It is time to raise our sights. Even though James Meek’s analysis will seem to most people in all the main parties to be absurdly old-fashioned in its belief in state provision and state intervention in markets, it does cast light on the feebleness of most current policy solutions.
CPRE viewpoint 
At last, someone saying that the housing crisis is more complex than many would have us believe. However, we must also not fall into the trap of over-complicating the solutions.
The robust views of our President were widely reported on New Years Day in the Daily Mail:-
‘We must stop this dismal sprawl’
http://www.dailymail.co.uk/news/article-2532020/Sir-Andrew-Motion-need-green-growth-respects-environment.html#ixzz2p9BLfnIw
Andrew, how very pertinent a follow up – the CPRE article in the Daily Mail vastly over simplifies matters with horrible generalisations such as implying all development is “sprawl” and simply dismissing new town ‘eco-towns’ or ‘garden cities’ without discussion or distinction from any other form of development, good or bad.
Shaun Spiers’ intervention above is of the quality and intelligence we have a right to expect from CPRE. The Poet Laureate’s are a disgrace and do an excellent organisation and, more importantly, cause a great disservice. Were it not for the above we would be reconsidering our membership.
“putting aside land for houses isn’t the same as building them. The historical evidence suggests Britain’s private housebuilders have been driven less by the urge to build the maximum number of new homes than by the urge to make as much (or lose as little) money as possible.”
And the economic argument, since Adam Smith identified ‘the invisible hand’ is that this argument about motivation is irrelevant. We need to understand the structural factors which mean that asset valuations are more important to developers than margin times volume of transactions, which matters for more normal businesses.
Do we think the market failure here comes from “housebuilders’ canny local agents” somehow getting their clients to act as cartels, or could we think seriously about how “The whole system incentivises land hoarding and an undersupply of new homes compared to demand, to keep prices high”