The rise of the Yimbys – passionate but misguided!

One phenomenon, which has arisen in relation to housing policy, is the rise in the YIMBY movement – Yes In My Back Yard.  Although their objective -  “everyone deserves a high quality, safe and affordable place to live. That means we want to see better places and more homes built with the support of local communities. ... we support more high-quality homes near us." appears well intentioned, their outlook is fundamentally flawed being based as it is on an outmoded and simplistic supply and demand approach.

 

https://yimbyalliance.org/about-us/

 

Many self-proclaimed ‘Yimbys’ adopt a messianic approach, seeing themselves as following the true faith in concern about housing. This has the unfortunate effect of ignoring alternative narratives, and ignoring evidence.  Some block those who seek to question their views.  The ‘Yimby’ fraternity adopt the attitudes of the free-market lobbyists, essentially pursuing policies leading to unsustainable growth. Lets examine the actual situation.

 

Why do house prices increase?

Increases in house prices can be largely attributed to their function as assets, where buyers/investors seek returns when interest rates are low and returns elsewhere are limited.  Earnings also push up prices as people have more money to spend. There are then regional variations to consider, these arise from a combination of factors – people moving to an area with significantly greater resources than existing residents; competition with second home and holiday lets buyers. Increased competition may also arise if investors buy property in an area under buy to let, seeking to gain from the private rented market. At the same time access to resources for housing vary. Earnings levels vary considerably resulting in many households unable to ‘compete’ in the housing market.  Changes in housing support levels, tighter controls for first time buyers and a more flexible labour market have all made it difficult for some households to afford rents or buy a property.

 

In a report under the Bank Underground auspices, it was evidenced that low interest rates and rising incomes where the major factors influencing prices. . “…Between 1985 and 2018… 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%.”

[Miles, D., and Monro, V., 13 January 2020, ‘What’s been driving long-run house price growth in the UK?’, Bank Underground.]

 

 Is there a supply problem?

Each year more dwellings are built than the number of additional households.  We have a surplus in England of 1.5 million dwellings, [Cornwall 35,000 dwellings]. Of the 1.5 million, 579,000 are empty, 253,000 are considered second homes with 260,000 holiday lets. [360,000 unaccounted for]. [NB figures for second homes and holiday lets are estimates due to gaps in data collection].

 

Problems of affordability and poor quality housing will not be addressed by building more. There are policy options to deal with current problems including investment in updating existing properties, changing the mortgage market to assist first time buyers, changing the private rental market and providing support to renters. Its not a case of building more it’s a case of improving what we have and using the existing surplus.

 

How many new dwellings do we need in England?

What would a sensible target look like? There are a number of relevant variables – net additions in dwellings, all dwelling growth and household growth.  Currently dwelling numbers and net additions are increasing at a higher level than household growth. This reflects the growth of properties which are either empty, second homes or holiday lets. 

 

The current net additional dwelling figure – 189,300, could be used for the higher target, with the all household, occupied dwellings figure of 138,600)  for the lower level.  The aim of figure above the household (occupied dwellings) level would be to reduce any backlog in need.  At the same time the number of unoccupied properties should be reduced. 

 

Local targets would be adjusted to take account of the number of unoccupied dwellings.

 

Conclusion

‘Yimbys’ may be well intentioned but operate on a false set of assumptions and therefore come up with the wrong answers.  They are effectively supporting the free-market lobbyists.