The Foundations of the Housing Crisis - How Our Extractive Land and Development Models Work Against Public Good

The document titled "The Foundations of the Housing Crisis - How Our Extractive Land and Development Models Work Against Public Good" is authored by Emmet Kiberd and Abi O’Connor from the New Economics Foundation (NEF), a UK-based charitable think tank committed to transparency and independence from political parties. This paper is produced as part of the Reclaiming Our Regional Economies (RORE) programme, which aims to address the ongoing housing crisis in the UK by proposing alternative development models.

The paper highlights that approximately 8.5 million people in Britain are experiencing unmet housing needs. The existing economic framework governing land and housing in the UK has led to a severe housing affordability crisis, with house prices rising sharply relative to incomes over the past two decades. The average cost of a home in England now stands at about 8.3 times annual earnings, particularly severe in regions like London, where the ratio can reach as high as 38.4.

Between 1995 and 2022, land values in the UK increased by over 600%, amounting to £7.2 trillion, which now represents more than 60% of the UK's total net worth. The current land market exacerbates wealth inequality, as value is often derived not from the landowners' efforts but from collective investments in public infrastructure and community development. This system allows private landowners to benefit disproportionately from public investments, further entrenching socio-economic disparities.

The paper argues that the current development model primarily serves private interests at the expense of public goods. The planning system is criticized for being under-resourced and ineffective, leading to inadequate housing supply and poor-quality living environments. The mechanisms designed to capture land value for public benefit—such as Section 106 contributions—are failing, resulting in insufficient affordable housing and a lack of community amenities.

The authors advocate for an alternative development model that prioritizes public needs over private profits. Key proposals include stronger land readjustment powers for local governments, increased public ownership of land, and enhanced funding for public sector housebuilders to address the social housing deficit. The model suggests using best practices from other countries, such as the Netherlands and Germany, where public entities successfully recapture land value for community benefit.

Beyond just land and housing, the paper emphasizes the importance of sustainable transport, climate resilience, and biodiversity in urban planning. The current model is criticized for favoring car-centric designs that contribute to environmental degradation. An alternative model would promote active travel, better public transport, and green infrastructure, thereby fostering healthier and more sustainable communities.

The document presents a compelling case for rethinking the UK’s housing and land development policies. By adopting more equitable, sustainable, and community-focused practices, the authors argue that it is possible to create healthier living environments while addressing the pressing issues of housing affordability and wealth inequality.