Raising the Roof

How to Solve the United Kingdom's Housing Crisis

Jacob Rees-Mogg, Radomir Tylecote, Stephen Ashmead, Calvin Chan, Ben Clements, Luke McWatters, Daniel Pycock, Thomas Schaffner, Charles Shaw, Gintas Vilkelis, William Watts

• Publisher: London Publishing Partnership
• Year: 2019
• eBook ISBN:
  9780255367844
• Edition: 1
• Subtopic: Human Rights

Raising the Roof addresses one of the key issues of our era – the UK's housing crisis. Housing costs in the United Kingdom are among the highest on the planet, with London virtually the most expensive major city in the world for renting or buying a home. At the core of this is one of the most centralised planning systems in the democratic world – a system that plainly doesn't work. A system that has resulted in too few houses, which are too small, which people do not like and which are in the wrong places, a system that stifles movement and breeds Nimbyism. The IEA's 2018 Richard Koch Breakthrough Prize, with a first prize of £50, 000, sought free-market solutions to this complex and divisive problem. Here, Breakthrough Prize judge Jacob Rees-Mogg and IEA Senior Research Analyst Radomir Tylecote critique a complex system of planning and taxation that has signally failed to provide homes, preserve an attractive environment and enhance our cities. They then draw from the winning entries to the Breakthrough Prize, and previous IEA research, to put forward a series of radical and innovative measures – from releasing vast swathes of government-owned land to relaxing the suffocating grip of the green belt. Together with cutting and devolving tax, and reforms to allow cities to both densify and beautify, this would create many more homes and help restore property-owning democracy in the UK.

PART ONE

Raising the Roof

1. Raising the roof1
   Jacob Rees-Mogg and Radomir Tylecote
   Summary
   • The United Kingdom’s housing costs are now among the highest on earth, the economic and social impacts severe. Since 1970, the average price of a house has risen four-and-a-half-fold after inflation. No other OECD country has experienced a price increase of this magnitude over this period. London is virtually the most expensive major city in the world for renting or buying a home (per square foot). People often avoid moving to work in productive sectors because nearby housing is too expensive. The proportion of Britons who need financial support for housing is almost unique.
   • The 1947 Town and Country Planning Act put land use under unprecedented statutory control, and the resulting regulation has caused at least half the rise in house prices over the last generation. The ‘green belts’ the Act created have grown far beyond what was planned, more than doubling in size since the 1970s, taking in derelict and already developed land, leading to building on more attractive areas. The complex and bureaucratic planning system has favoured big housebuilding corporations over small builders. The resulting identikit estates have helped drive Nimbyism.
   • Since the war, government has also centralised taxation. With 95 per cent of tax collected centrally, local authorities have little incentive to allow housebuilding in order to gain additional revenue from new residents.
   • National-level taxes drive house prices higher: Stamp Duty hinders downsizing; tax on buy-to-let landlords increases rents; ‘Help to Buy’ has made it harder to buy, inflating demand and pushing up prices.
   • Central government control over the housing market was intended to provide homes, preserve an attractive environment and enhance our cities. It has failed on every count. Radical action is needed to lower housing costs. This means allowing more homes to be built by removing fiscal and regulatory barriers that hinder supply.
   • Tax distortions at national level should be reversed; then government can begin the process of tax devolution. For example, Stamp Duty could be cut to 2010 levels, simplified, and then devolved to local government; non-property Inheritance Tax should be cut to the level of property, and Capital Gains Tax reduced on shares; discrimination against buy-to-let landlords should be ended.
   • More government land can be used for housing. Reverse Compulsory Purchase Orders – effectively a new Right to Buy – would allow the private sector to demand its sale. In addition, a cabinet minister could be given responsibility for identifying and releasing state land.
   • Where green belt land achieves none of its official purposes, it can be selectively reclassified, with a presumed right to development. Most green belt land should remain, however. This proposal should apply in particular to derelict or already developed sites. Green belt land near transport hubs should be a declassification priority, including Metropolitan Green Belt land within realistic walking distance of a railway station. The amount of green belt land needed is very small: just 3.9 per cent of London’s green belt is needed for one million homes.
   • Permitted development rights for individual streets (in cities) or villages would see residents gain from building, as controlling local building lets people demand the styles that research shows they want (instead of tower blocks, for example). Residents of individual streets should have the right to vote to ‘extend or replace’ permitted development rights (for example by increasing the height of houses), subject to a design code they select. Letting urban streets densify and beautify will remove much public opposition to expanding the housing stock.
   • Urban local authorities should allow light-touch ‘notification’ to give self-builds fast-track planning permission. Residents would build according to a style guide if one were applied by a local authority or street. Style guides created the beauty of Bath and Bloomsbury. There is no reason not to use them once more. No one has a monopoly on beauty, however. Style guides should be optional.

Introduction

It is no coincidence that the United Kingdom has both the most centralised planning system of any large country in the democratic world, and one of the worst housing crises in the democratic world. Quite simply, the central planning of housebuilding does not work.

Our country’s attempt to place housebuilding considerably under central state control since World War II, however well-intentioned, is, paradoxically, why the centre demands housebuilding and does not get it; it is why, when housing is built, it is so often disliked, leading to the Nimbyism that so befuddles Whitehall; and it is why, despite the business of housebuilding being so profitable, houses still go unbuilt. We build too few houses, which are too small, which people do not like, and which are in the wrong places.

This paper will describe a radical programme to cut the Gordian Knot that is our centralised planning system. When this is put into action, some of which can be done incrementally, the United Kingdom will be able to undo its almost uniquely severe housing crisis.

At first glance, our central proposition may seem ­counter-intuitive. Surely the central state is exactly the organisation that can ‘push through’ new housebuilding. In fact, since the end of World War II, by centralising almost all taxation and much decision-making from our local governments and localities – to a degree seen elsewhere only in socialist countries – it has thwarted the free market which could otherwise build the houses people actually want. Here, a socialist system has meant the usual socialist outcome: failure. Central government is responsible for most of the United Kingdom’s housing crisis.

We will discuss below how this came about after 1945, and how it can be solved. Before that, it is important to understand how serious our problem now is.

Our failure to build is often called our most serious economic problem. The evidence tells us that it is, in fact, a catastrophe. For over a generation, we have built houses at a lower rate than any other country with comparable data. Estimates suggest a shortfall below the desirable level of new-build housing of 2.5 million since 1992 (Cheshire 2018); since 1970, the average price of a house has risen four-and-a-half-fold after inflation, where the UK is again an outlier, with no other OECD country experiencing a price increase of this magnitude over the period (Niemietz 2016). In the 1970s, the average buyer needed under three gross annual salaries for a house. Now, before interest payments, this is over seven, also making the UK unique.

The housing costs Britons face are now among the highest in world, and this holds for house prices or rents, in absolute terms or relative to income. There is a shortage of housing for first-time buyers, in the social housing sector, and in private accommodation (ibid.). We lack houses of every type.

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1 This essay was originally published as a separate paper in July 2019. The authors are particularly grateful for the advice of John Myers of London Yimby, Nicholas Boys Smith at Create Streets, Robert Wickham and Keith Boyfield, as well as ...

Table of contents

• The Richard Koch Breakthrough Prize
• About the authors
• PART ONE
• Raising the Roof
• 1 Raising the roof
• PART TWO
• 2 The Land Purchase Act
• 3 Presumed permission: a self-build framework for local development rights
• 4 Simplified Planning Zones and the realignment of fiscal incentives
• 5 Planning to the people: how a system of transferable development rights could replace the green belt
• 6 Taking on established interests: a new approach to land to solve the housing shortage
• 7 The Localism 2.0 reform
• 8 A supply-side answer tothe housing crisis: false impressions and true solutions
• A note on the longlist
• About the IEA