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‘Forest city’ a fantasy based on unsound arguments, flawed reasoning and make believe!

  • rpwills
  • 6 minutes ago
  • 6 min read
Summary
‘Forest city’ is a proposal to build a large city in the Suffolk-Cambridgeshire area.  The underlying reason for developing this city is that Britain is short of dwellings, which it is asserted makes housing unaffordable.

Looks like a forest!
Looks like a forest!
 
Although it sounds entirely necessary and feasible it is in reality based upon the premise that we need to increase housing supply to make housing more affordable.  Yet the evidence suggests otherwise. 
 
1) England has a surplus of 1.5 million dwellings rather than a shortage.
 
2) Increases in house prices are due to a number of factors:
Four main factors have been identified.  These are -
Deregulation of housing finance initiated under the Thatcher government.  This increased the supply of funds from banks, which pushed up values.
Housing and asset values – as alternative assets provided lower rates of return then house values rose. This was exacerbated by quantitative easing (QE), which resulted in further distorting the interest/asset value relationship.  
Investors whether foreign buyers or those seeking profit from the buy-to let sector have bidded up property values. 
 
3) Tax cuts.  Another important element is that reductions in the higher rates of income tax allied with the growth of those with high earnings has given some households to ability to afford higher prices thereby pushing up values. Dwellings have also been removed from the residential housing market and transferred to the second home and holiday let sector.
 
4) Deregulation of the labour market and cuts to benefits have impacted people’s ability to afford to either buy or rent property.
 
‘Forest city’ fits within the discourse promoted by the free market fraternity who avoid the negative impacts of the policy changes they have supported in the past and today. 
 
Introduction
The ‘forest city’ idea is for some 45,000 acres in the Suffolk-Cambridgeshire area to be developed as a new city. The land is currently agricultural with a number of small villages.
 
The rationale is set out on their website -
We need to build beautiful homes in places people want to live, enhance the nature around them, and create communities where families thrive
We build too few homes. In the wrong places. That few people like. Without planned infrastructure. Then act surprised when locals object, buyers can’t afford them, and nothing improves.
This isn’t a housing crisis—it’s a policy failure
Britain is short over 4 million homes. You’re earning good money and can’t buy a flat. And every development becomes a planning battle that satisfies nobody. We can keep doing this. Or we can build a city.
 
 
It all sounds very logical and reasonable, but it is based on a number of assertions, which fail to stand up to scrutiny. 
 
The most significant assertion is that Britain is short of 4 million homes.  This statement is derived from a report published by the Centre for Cities in February 2023.  It boldly stated that the UK had not been building enough houses and had a shortfall of 4.3 million.
 
The Centre for Cities report based the figure using a strange methodology comparing dwellings per person across a number of European countries.
 
But the crucial point is, if we compare the number of dwellings to the number of households, we find there is a surplus of housing not a deficit. Analysis by Ian Mulheirn in 2019, suggested that we actually had a surplus of housing in England. The report (1) stated "the ‘surplus’ housing stock grew by around 70%, from 660,000 in 1996 to 1.12 million by March 2018”. Data from the 2021 census confirms this picture; it gives 24.9 million dwellings yet households total 23.4 million, giving a surplus of 1.5 million or 6.4%.
 
And if we look at some other European countries what do we find? We might assume from the Centre for Cities report that they have higher levels of dwellings in relation to households? Not so. Sweden has a surplus of 5.5%, Germany 5.4%, France 8.6%. Contrary to the Centre for Cities contention, England with 6.4% is little different from other European countries with regard to stock and households.
 
The ‘forest city’ approach takes the Centre for Cities line that affordability is due to a lack of supply.  Any analysis of housing economics indicates that this assertion is just that an assertion detached from the reality of the housing market.
 
So why have house values gone up creating problems with affordability and lack of access to housing?
 
Deregulation
A significant factor in the rise of house values can be attributed to the change in policy in the 1980s brought in under the Thatcher government.  Keen states - “…  before 1960, house prices rose at the same rate as consumer prices did. At the average rate of relative increase before Thatcher, it would have taken 280 years for house prices to double in real terms. At the rate between 1945 and Thatcher, real house prices were doubling every 40 years. After Thatcher, real house prices doubled every 23 years.” [Keen, 2025].
This is made worse by a feedback loop where - “At the same time, rising house prices support an increase in the supply of mortgage credit because banks collateralise their lending against the value of the house (and land) they are lending against.” [Ryan-Collins, 2024].
 
Housing and asset values
Houses are different to most ‘goods’ in that they both provide a service – somewhere to live and are also an asset as noted by Lewis and Cumming (2019).  A household gets the service either by purchasing the dwelling or renting one. In terms of a dwellings value as an asset  “Economic theory says asset prices should be determined by the value of future income flows. So how much is a bulb that produces £100 of tulips annually worth? If real interest rates on other assets are say 10%, then people would be willing to pay £1,000 for the bulb to get the same return. If they fall to 5%, the value of that same stream of flowers doubles to £2,000. Supply hasn’t changed, the price of tulips hasn’t changed either, but bulb prices have doubled.” [Lewis and Cumming, 2019].
 
After the Great Financial Crisis GFC), lower real interest resulted in rising property prices as the returns on assets rose in relation to interest including the return on government bonds. Miles and Monro in 2020 stated “… we estimate that the long-run effect of the decline in the risk-free rate increased real house prices by about 108%; the increase in household income increased house prices by around 80%; whilst the increased net tax obligations pushed house prices down by around 15%.” 
 
Quantitative easing (QE), affected the interest/asset value relationship.  
“One of the key mechanisms in the counterproductive evolution of UK policy was the transmission of QE’s effects into interconnected markets, especially the housing sector. As QE reduced interest rates and increased liquidity, it unintentionally inflated asset prices, including property values. Investors seeking higher returns channelled capital into property markets, driving up house prices and exacerbating affordability issues.” [Mandelkern and Oren, 2025]. 
 
Investors bidding up prices
As housing has been seen as an asset with potential for growth, it has led to investors purchasing property.  “A recent study estimated that foreign property buyers have pushed up house prices in Britain by 17% over the last two decades.”  While “between 2009 and 2015 complex corporate structures mostly registered in offshore tax havens purchased nearly 28,000 London properties and land parcels at an estimated value of £100 billion.“ [Ryan-Collins, 2024].
 
Another element of investors purchasing dwellings is the growth of the Buy to let market.  According to a report by Hamptons, there were over 400,000 companies registered for buy-to-let in February 2025.  “Companies House now has more registered buy-to-let companies than any other type of business. There are nearly four times as many buy-to-let companies operating than either fast food takeaways or hairdressers”.  [Hamptons, March 2025]. 
 
The holiday sector
This consists of dwellings either used as second homes or for holiday lets. The English Housing Survey suggested there were 809,000 second homes in England.  Council tax data indicated a total of 984,000 second homes. It is estimated that there are about 148,000 holiday lets in England.
 
 
 
 
 
Changes to benefits and the labour market
Cuts in benefits have made it more difficult for young people to afford rents, and in 2012 a change to housing benefit rules was introduced that prevented single people under 35 claiming for a house of their own. [See https://twitter.com/ianmulheirn/status/1623971584074567682]. Potential house purchasers were affected after the changes in the mortgage market following the Great Financial Crash, resulted in restrictions on borrowing, again with negative impacts on young people, The ‘flexible’ labour market has created a more financially insecure workforce, particularly in younger age groups impacting their ability to rent or buy.
 
Other issues
The site is in an area, which is important for food production.
Water shortages are a problem in the area and are expected to get worse.
New homes are not needed in the area.  The alleged rationale for new dwellings is that supporters of the Oxford-Cambridge arc want to increase the population!
 
 
Conclusion
The ‘forest’ city concept is based on a false narrative that a lack of supply is the reason behind the housing problems that people face.  It blithely ignores the range of factors – notably deregulation of the housing funding and the role of dwellings as assets, which have created issues of affordability and lack of access for many people. 
 
Such issues can be resolved by appropriate policies – the ‘forest’ city is not one of them!
 
Sources
Forest city website
 
 
 
 
 
 

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