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The Foundations of the Housing Crisis - How Our Extractive Land and Development Models Work Against Public Good is a position paper published by the New Economics Foundation, authored by Emmet Kiberd and Abi O'Connor. This document critically examines the inefficiencies of the current housing development model in the UK, highlighting how it primarily benefits a small number of private owners while exacerbating income and wealth inequalities.
Executive Summary
The current economic model that dictates land and housing development in the UK is fundamentally flawed. It extracts value created collectively from local communities to benefit a few private owners, contributing to stark wealth disparities. The paper reveals that approximately 8.5 million people in Britain face unmet housing needs due to escalating house prices and a poorly regulated private rental sector. The cost of housing has surged, with house prices now averaging 8.3 times annual earnings, and nearly 40% of residents find it challenging to manage their rent or mortgage payments.
Housing and Land Crisis
The housing crisis is deeply intertwined with a dysfunctional land market that has seen land values rise over 600% since 1995. This significant increase has resulted in land making up 45% of households' net wealth, leading to pronounced regional disparities. The existing development model allows landowners to capitalize on "hope value," the prospective increase in land price due to planning permissions, often resulting in substantial profits without any contribution to public goods. This has led to land banking, where sites remain unused, exacerbating the housing crisis.
The Need for Reform
The paper emphasizes the necessity for a robust increase in social housing construction to address the backlog in housing needs. It argues that the current developer-led model is insufficient for delivering this essential social housing. Additionally, local planning departments have been under-resourced due to budget cuts, hampering their ability to effectively engage with communities and enforce planning regulations that prioritize public interest over private profit.
Alternative Development Models
The authors propose an alternative development model informed by successful practices from other countries, such as the Netherlands and Germany. Key features of this model include stronger land readjustment powers, increased public ownership of land and housing, and restored funding for local planning departments. These changes aim to ensure that the benefits of land development are returned to the public, enhancing community well-being and promoting sustainable development practices.
Barriers to Effective Planning
Current planning systems are depicted as barriers to effective housing solutions, with political discourse often oversimplifying the issues to mere calls for increased housing supply. The authors advocate for a planning system that redistributes power from private developers to local governments, emphasizing the importance of democratic engagement in land use decisions. The existing planning framework often prioritizes profit over community needs, neglecting the essential role of public consultation and local governance.
Economic Implications of Housing Policies
The economic implications of the housing crisis are significant, with housing benefits costing taxpayers approximately £23.4 billion in 2022. A lack of sufficient social housing leads to increased reliance on temporary accommodation, contributing to financial burdens on local authorities. The authors argue that constructing an estimated 90,000 social homes could yield a net economic benefit of £51.2 billion, through reduced spending on housing support and improved public health outcomes.
Sustainable Development Goals
The paper also highlights the importance of aligning housing and land use policies with sustainability goals, including climate and biodiversity commitments. The current model often neglects environmental considerations, leading to higher emissions and energy usage in new developments. A reformed development model should integrate sustainable transport, green spaces, and community amenities to create healthier living environments. In conclusion, the New Economics Foundation's paper calls for ambitious policy changes that prioritize public good over private profit, aiming to create equitable, sustainable, and healthy living conditions for all residents.