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Why the ‘we must build more houses’ people just don’t get it!

rpwills
The supporters of the ‘we must build more houses’ approach think they have the answer to housing problems. It’s so simple; you just eviscerate the planning system and let developers build, and with more houses/flats about all the issues – high prices, affordability, etc just disappear. But as is often the case simple ‘solutions’ are not solutions at all. So what are the flaws?


The 'we must build more houses' supporters suffer from tunnel vision!
 
Its not a lack of supply
Dwellings as assets
Rather than a lack of supply, high house values largely reflect the increase in asset values linked to low interest rates following the Great Financial Crisis of 2009-08 exacerbated by the use of quantitative easing which further increased asset values.
 
Higher earners spend less on housing
Earnings are also a factor in house price increases. Areas with higher levels of earnings generally have higher dwelling prices. Higher earners spend less of their total income on housing so can afford to bid up prices.
 
Irrelevant comparisons
There is a tendency to use data which based on flawed assumptions purports to indicate that the UK is building fewer dwellings than it should compared to other European countries.  Yet if dwelling numbers and household figures are used, there is little difference between countries with most showing a surplus.  France if often cited as a ‘good’ example. Yet analysis of the data reveals that France has a lot of empty and unused properties, which are not required for housing. A similar situation in Austria. So an unnecessary surfeit of dwellings and a meaningless comparison. 

There is also a tendency to look at the wrong variables such as vacancy rates which exclude many unoccupied dwellings or two dimensional charts which use the wrong data.
 
The planning system is riddled with holes
The current system allows developers to build dwellings which may not be suitable to meet the needs of local residents instead building those which can be used for second homes, holiday lets or investment properties. These will be more profitable for developers and therefore a more desirable option for them. Developers argue against providing more affordable housing, which they could and should provide.
 
Affordables/social
The small number of social and affordable dwellings built reflects an inability by government to recognise a need for housing provision for households on low incomes.
 
Its not how many you build its who buys the dwellings
Supply side obsessives would probably think that if people have problems buying food you just open more restaurants! As soon as a dwelling is built (or its an existing property), and put on the market anyone can buy it, assuming they have the resources.  So dwellings are added to the local stock but dwellings may end up as second homes, holiday lets or investment properties. There is no guarantee of them meeting local need. 
 
Missing factors
The ‘we must build more houses’ supporters conveniently ignore the range of factors that influence the ability of households to obtain housing:
 
A ‘flexible labour market’ which impacts on earnings,
Changes in benefits which limit the ability of people to pay rents or mortgages,
Tighter controls on borrowing instituted since the Great Financial Crisis,
An insecure world for many in the private rented sector.
 
Offering simple answers may provide great soundbites but poor policy and will result in many disappointed people when they realise it will not solve their problems.
 
 
 
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1 Comment


miranda.holmes
May 27, 2024

Every article misses to include the housing numbers are because of how high immigration is. Latest ONS stats show an extra 1.25 million immigrants EVERY year that need to be housed. The infrastructure NHS, services, GP surgeries, sewage and drainage all overstretched. Why is such a key factor excluded from the article?

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