The shortage of housing supply in the UK has resulted in prices rising by over 300% in the last 25 years, creating an increasingly acute housing crisis.
The blame for this housing crisis is often laid at the door of the planning system.
But is that view supported by the facts? This blog post considers the evidence.
The housing crisis isn’t something that has just appeared. It has been building over a number of years.
In 2004 review of the housing market, Kate Barker estimated we needed to build 250,000 new homes every year just to keep pace with demand. Yet last year, less than 150,000 new homes were constructed. This isn’t because of the economic climate though – the last time more than 200,000 new homes were built in a year was 1988 – almost 30 years ago.
As demand has outstripped supply, so house prices have risen dramatically. According to Nationwide, since 1990 the increase has been more than three-fold.
Spreading the blame
There is a lot of finger pointing when it comes to assigning blame for the housing crisis. Local authority planning departments blame developers, accusing them of constraining the supply of new homes through ‘land banking.’ Developers blame the planning system, arguing that it is too restrictive and inflexible.
In a previous blog, we’ve looked at the accusations of land banking in detail and concluded that there is no evidence the practice takes place on a wide scale, if at all.
But is there evidence to suggest the planning system is at fault?
Planning v Prices
There are a number of possible causes for the shortage of housing supply so untangling them can be complex.
A recent research paper by academics Christian Hilber and Wouter Vermeulen looked at just this issue.
Using data from the whole of England and a sophisticated mathematical model, they considered a range of possible impacts on house prices in England. This included the availability of land, physical constraints (like how hilly an area is), and the planning system.
Their conclusion was that the single greatest impact on house prices was caused by the regulatory constraints imposed by the planning system on development. Overall, the planning system is responsible for some 35% of UK house prices. Or, to put it another way, the average price of a house in the UK, which is currently £292,000 according to the Office of National Statistics, would only be £189,800 were it not for the constraints of the planning system. The planning system adds £102,200 to the price of the average house.
By contrast, all the physical constraints on development combined are responsible for just 15% of house prices.
Planning for failure
Why should the planning system be such a constraint on housing supply?
The way the system is structured, with locally elected councillors having the final say on decisions, means that applications aren’t always determined on an entirely rational basis. Those few, vocal objectors who live near the proposed development are often enough to tip the balance against the application.
Those same pressures even apply to central government, with political considerations meaning, for example, that a review of national Green Belt policy which could release additional development land isn’t on the cards.
In an effort to minimise the potential for objections to new developments and to accommodate the concerns of ever more people, the planning system has grown increasingly complex. The large volume of information required to support a planning application is now so expensive, that many can’t even afford to make one in the first place.
But the housing crisis is real, with real impacts on real people. For most of us, the only way we can help address the crisis is by letting politicians know that there are plenty of voters who would actually support new development. If you want to do that, write to your MP, write to your local Council or sign the ‘Yes To Homes’ petition.
If you’re lucky enough to own a piece of land that you think might be suitable for residential development, The Strategic Land Group can help you. We specialise in promoting land through the planning system on behalf of land owners. We cover the costs of the application and use our expertise to secure planning consent before marketing the site for sale on your behalf. In return, we ask for a share of the land value when the site is sold. Get in touch today to find out more.