Difficult Housing Choices Face Us All


Chancellor Gordon Brown has endorsed a report calling for an increase in house building in Britain.  But Steve Melia, campaigner against a new town in Devon’s South Hams, fears the report prepares Britain for a European single currency and gives the green light to massive new development that threatens our countryside.


To prepare for entry to the Euro, the Treasury believes we must build over more of the countryside.  The connection was revealed in a little-noticed passage in the Chancellor’s budget speech, welcoming the Barker report into housing supply. 


That the Treasury should commission a study concerned mainly with land use and planning is significant, and worrying.  Gordon Brown and his officials believe the U.K. economy is not yet ready to join the Euro.  One obstacle is our housing market, which behaves very differently from most others in Europe.  Without reform, a single European interest rate (currently lower than ours) could wreak havoc in our housing market, with inflationary consequences for the whole economy.


Why is our housing market so inflexible? Why does the rate of house building not increase when the price of housing rises rapidly, as it has in recent years? These were the central questions the Barker review was asked to examine.  Although it contains some sound analysis, the main recommendations would, if implemented, be catastrophic for the remaining rural areas of Southern England.


The problem, the report argues, is caused by restrictions on the supply of land.  Planning authorities, it recommends, should allocate a “buffer” of additional greenfield land, equal to 20% to 40% of their total housing target.  This would mean, for example, South Hams and Plymouth, between them, finding an area of countryside the size of Totnes (at 20%) or Tiverton (at 40%) on top of Sherford ‘Concrete Valley’ (4,000 homes near Brixton) and all the other developments in the current plan. 


Developers could then submit planning applications to build anywhere in this area, at any time.  “Market forces” would determine whether these applications were granted or refused.  If house prices or land prices were rising more rapidly than elsewhere, then Councils would lose the right to refuse.  In this way, rapid urbanisation would, allegedly, restrain price rises in areas of high demand.  It would also leave builders free to “cherry pick” the most profitable areas for early development, which may well be in more remote countryside.


Apart from the obvious environmental damage, there is a serious flaw in the reasoning behind this policy.  Even in times of rapid expansion, newly built houses form a tiny proportion of the total stock (less than 1% in a year).  Increasing the rate of building can make a big difference to supply in the longer-term, but in the short-term, prices rise and fall for different reasons, like changes in interest rates, unemployment or incomes.  To release more land in a knee-jerk response to short-term price rises, would seem to make no sense.


Kate Barker is an economist, not a planner.  And like many in her profession, she displays a quasi-mystical faith in the power of ‘expectations’.  Her response to this apparent contradiction runs as follows: a rush of bulldozers and hard hats in a particular area (or nationwide) will send out at signal that supply is going to rise in the future.  Increasing supply will reduce expectations of future price increases.  Demand will then fall because buyers will no longer view property as such a good investment.  And so the act of building, insignificant in itself, may reduce house price inflation, even in the short-term.


If this logic leaves you unconvinced, then you are not alone.  Research for the Campaign to Protect Rural England has shown that, across the country as a whole, there is no shortage of housing.  The problem is one of distribution and housing type.  Building rates have halved since the 1970s, but the fall is entirely due to public sector social housing – private building has remained fairly constant.  Proposals to build more social housing, and curb the ‘right to buy’ council houses are two of Barker’s more sensible recommendations.


The report identifies obstacles preventing brownfield urban development, but contains few proposals to remove them.  Government guidance has tried recently to raise the densities of urban development.  Barker would reverse this, where market forces favour the building of “more 4 bedroom houses”.  In fact, it is possible to build larger houses at higher densities.  You will see examples in many of our older town centres – typically terraced, three or four stories high, and nowadays, very desirable.


On migration, the main cause of our problems here in the Westcountry, she assumes, like most economists, that we can and should build wherever people want to move.  International immigration is completely ignored.


Debate around migration has centred in the past on issues of race and economics.  In all the hysteria about asylum seekers, the quadrupling of work permits since 1995 – now running at over 150,000 a year – has passed largely without comment.  These highly skilled people are coming to work, so ‘what’s the problem?’ David Blunkett has argued.  The environmental implications of migration flows are complex, but at its simplest, excluding small nations, Britain is the most densely populated country in Europe, second only to Japan in the developed world.  And an influx of highly-skilled workers will increase the demand for housing far more than unskilled refugees.


Most of the in-migration to the Westcountry is domestic, but the issues are the same.  The “freedom of movement” argument is a red herring.  No one is proposing a passport control on the M5, but by the same token, none of us enjoys totally unrestricted freedom of movement.  We are all constrained by the price and availability of housing, and our own preferences: the house or the location? Which of us has not, at some point, been forced to compromise?


Unwittingly, some local planning authorities may have stumbled across a long-term solution to this problem.  The draft local plans for South Hams and Dartmoor National Park would impose high (50%) quotas of affordable housing permanently reserved for local people.  If this principle is maintained over the longer-term, it will lead to a 2-tier housing market, similar to, but less rigid than the system in the Channel Islands.  The price of ‘unrestricted’ open-market housing will rise, restraining in-migration, whilst local people on lower incomes will remain protected.


Like any solution to a problem, there are downsides to this – “restrictions on the movement of labour” are anathema to free-marketeers like Barker.  For the rest of us, they may be the price of a better quality of life for everyone.  In his budget speech, the Chancellor was careful to defer the more controversial questions until after the next election.  But shares in building companies rose in response.  The markets realise, if Labour wins, these proposals will return to the Government’s agenda.


These issues are too important to leave to politicians and economists.  There are difficult choices facing all of us.  Should we accept their free-market vision and the loss of countryside it would bring? Or should we pursue a different strategy, developing at higher densities, and discouraging unsustainable migration? Whatever the politicians are planning, we need to know before they ask us for our votes.


The Euro is only one factor in all of this.  As a cautious pro-European I have always considered the arguments to be finely balanced.  But if these proposals are accepted as pre-conditions for entry, then the case against has never looked stronger.



© Steve Melia March 2004 www.stevemelia.co.uk


For Kate Barker’s Report, and CPRE’s response see: www.cpre.org.uk