rss feedHousing: Winners and losers (July 2018)
Affluent areas have seen enormous increases in house prices, adding wealth to the rich. In poorer areas, they pay more rent. The intergenerational story is similar. The older generations gain from house price inflation. The young pay higher rents. The biggest cause of the rise in prices is the housing shortage caused by planning restrictions.
Agricultural land increases in value when planning permission is given. Government figures for 2015 gave the average price of agricultural land as £21,000 per hectare. In Wakefield, building land, at £1.0 million per hectare, was valued nearly 50 times as much. In Enfield this was over 700 times. The extra value is the planning premium – a windfall to landowners.
The cost of building a conventional house is about £50,000. A 3 bed house in Liverpool will have roughly the same cost of construction as one in Enfield but in Liverpool it will sell for about £90,000. A similar house in Enfield, North London, would be £430,000. That extra £340,000 in Enfield is in large part accounted for by the landowner’s planning premium.
Modern technology using wood construction can significantly reduce costs, providing houses that are similar to conventional bricks and mortar houses but much cheaper. However, people can – and do – live in less conventional housing – like park homes or static caravans. Planning restrictions often apply (e.g. excluding younger generations) so these are often classified as holiday homes.
Here costs can be even lower but space tighter: A log cabin big enough for an old man like me can be bought for well under £10,000. Add mains electricity for £2000, mains water for £1000 and good modern cesspit for another £1000 and I could have somewhere to live for under £15,000. Many residents like this way of life:
I’ve been living in a holiday home on a site near York. There’s nothing more life affirming than waking up surrounded by nature- woods, birds, the occasional deer and falling to sleep to the sound of hooting owls. The space and the fresh air put a bounce in your step!
I grew up in Kent in a house built by my father (and relations) on a plot of land bought as a wedding present. Building started until 1946. These plots initially contained lightweight buildings used as weekend refuges from the local town. Over the years these were replaced by permanent houses, now valued in the £400,000 range. This form of development, plotland development, stopped with the 1947 planning act.
The 2015 Self-build and Custom Housebuilding Act requires planning authorities to keep a register of people wanting plots of land to build or commission their own homes. Cynics, like me, think this was a move to keep the self-build option under control in case it became to close to building a cheap home on your own land – a solution often lauded by the Daily Mail.[1,2,3]
Progress has not been spectacular. In 2016, Carillion igloo said:
[We] have today announced the official launch of HomeMade at Heartlands. [T]his is the first Government Custom Build pilot site…
The Right to Build Toolkit reported that these plots will be for sale at around £50,000 each and an entry-level house will cost £130,000 to £140,000. That’s not cheap for the Heartlands’ area of Cornwall and unlikely to shock the housing market.
Reducing the unfairness coused by house price inflation requires changes to the planning system, for example by policies targetted at the landowner’s planning premium. This can – and should – be reduced by issuing planning permission for many more housing plots – but with caution to avoid a dangerous fall in house prices.
Other policies could transfer some of the planning premium to house buyer. For example, if some planning permissions were allocated on the condition that building could only commense when an accredited buyer agreed.
The state would issue ‘house buyer certificates’ to give accreditation to those locked out of the housing market. Depending on issuing policy this could give them some market power to buy cheaper homes. This scheme should work without much resort to compulsory purchase and its accompanying politcal fuss.
Green belt policy is a major element in restricting planning permissions and keeping house prices high but it is so well entrenched that it is difficult to criticise (but I often do). However, Siobhan McDonagh’s Early Day Motion, HOUSING AND LONDON’S GREEN BELT, may be politically possible. After recognising benefits of greenbelt policy it says:
[This house] considers the scattered plots of Green Belt land within a 45 minute travel time of London’s Zone 1 and less than a 10 minute walk to a train station to be ill-fitting to the purpose of the Green Belt [and] recognises the important opportunity that this land offers with space for over 1 million new homes;
Britain’s economy faces an unsure future and the young and poor may suffer most. If the unfairness of the housing market can be tackled, their cost of living can be considerably lowered. Reducing planning premiums and encouraging cheaper construction could have a dramatic effect on their situation especially if they could also take a share in these planning premiums.
Many of us realise that climate change looms over the whole world and that the richest 10% cause half of the emissions. Britain’s contribution could be to create lifestyles that are pleasant and truly climate friendly. We need prototypes that the rest of the world can follow.
I suggest that a new Ministry of Works should be created – similar to the one that developed the prefabs programme in the 1940s but with a wider brief to create prototypes of cheap and green settlements with their own internal economies, which also integrate with the wider world.
A possible prototype would be a car-free estate of wooden prefabs with inbuilt market garden. A good place to locate one would be on land ‘less than a 10 minute walk to a train station’ and ‘within 45 minutes of London’.
