Housing – remedies designed to fail

In the face of a housing bubble that is pricing a lot of people out of housing in London and the South East, a variety of ideas are blooming in the spring. Some of them are described in an article by Polly Toynbee in today’s Guardian. None of them address the issue.  An interest rate rise is suggested, but the interest rise that will damp growth of the London bubble will be too high for the rest of the country. Building hundreds of thousands of houses is useless unless they are in the right place, which is where the economy is healthy. It has been claimed that, overall there is a surplus of several hundred thousand vacant homes, plus more than 300,000 planning consents which have not resulted in building. Thus there is not an overall shortage. It is pretty much confined to London and the South East, and a few holiday areas where the housing has become popular for holiday or weekend use. Since this need, therefore, is mostly in London and the South East, where are these hundreds of thousands of houses to go, and who will plan and build and pay for the supporting infrastructure they will need? With this housing mass produced in a hurry, what kind of an environment will people end up living in?

Toybee puts forward a few ideas for making housing available at less than market price, but this would call for some kind of rationing process with allocation criteria. She also commends a suggestion put forward by Professor John Muellbauer, who says that the government should buy land at existing use value and sell it on with planning consent, possibly for social housing, taking the development gain value on the way. This is a re-hash of the method used in the 1940 to acquire land for building the post war New Towns. It would probably require compulsory purchase powers. Owners will not sell voluntarily but will prefer to sit tight waiting for the legislation to be scrapped as it inevitably will be. Muellbauer, who is now an Oxford professor, used to be an advocate for LVT but his professorship has obviously made him go silent on the subject.