Is Red Tape Choking House Building?

House building plummeted after the 2008 crash. (Photo: The Independent)

“They move us to Peckham, two bedrooms, not even in a council house,” Ashram, a 17-year-old living in London, explains. “The double bed [that he shares with his brother] is just the length of this room,” as he gestures to the room, barely big enough for us to sit in.

In an office in the Damilola Taylor Centre, Ashram tells me about living in a hotel room with his family of five people for six months, before being promised a council home several years ago. Eventually he was moved by the council to his privately-rented two bedroom flat. “They build [housing developments] up but they never give them to the people. I don’t understand why”. Ashram is just one example of the struggle many people in the UK face to try to find a decent home, but his story is increasingly common.

UK house prices have risen faster than that of any other G7 country in the past 20 years. While home sales are rising, the stockpile of available of homes has fallen to its lowest level on record.

This has led to rent and mortgage payments eating further and further into salaries. The problem is especially acute for low-income earners, who are more reliant on social housing. The building of social housing more than halved in 2012, and has declined since then. Those on low incomes will be squeezed more tightly by plans to sell off council housing and replace it with “starter homes”, which, according to Shelter, a homeless charity, will only be affordable for the “lucky few”.

It also stifles growth, especially in the South. Workers find it harder to afford housing in big cities, where they are most productive; many have had to accept lower salaries to live in cheaper areas. Some have flocked to commuter towns, such as Swindon, where residents can expect to spend £8,000 annually on the commute to London, according to Haart, an estate agent.

Furthermore, the housing crisis exacerbates rising inequality. While workers are forced to accept lower wages or have their higher wages suffocated by extortionate rents or mortgages, investors have profited from rising house prices and bigger mortgages.

Rigid planning laws are partly to blame. According to a recent paper from the London School of Economics, almost half of Green Belt land in London is not environmentally protected and not parkland, but is near a train station. The Campaign to Protect Rural England also claims that at least one million new homes could be built on disused brownfield sites.

The problem, however, goes further than red tape.  Planning permissions in the capital doubled between 2004-13, but houses were not built more quickly. House building plummeted after the 2008 crash as overstretched companies either went bust or took a much more cautious approach to avoid a repeat of 2008. The crash also made the housing market less competitive, as small builders were swept away by the downturn, leaving bigger ones to dominate.

UK house prices have risen faster than that of any other G7 country in the past 20 years. (Photo: The Telegraph.)


Should the government, then, take the place of the private sector and force companies to make rents affordable? Rent controls have already been introduced in Germany, which in 2010 built more than triple the number of homes than the UK built per 1,000 hectares. Germany also keeps landlords on a tight leash: as long as they behave well it is near impossible to evict a tenant, or suddenly increase their rent.

A lighter touch, however, might work better. Gavin Smart, the Deputy Chief Executive of Chartered Institute of Housing, a housing association, warns that we should be “cautious” of rent controls. He points out that it is easier to impose rent controls on Germany’s landlords, who are often part of bigger rental companies, than it is to impose on Britain’s, who are mostly self-employed.

Germany also gives cities more power to encourage house building. Currently, only “limited” building on Green Belt land is allowed, whereas in Germany the “right to build” is embedded in its constitution. Local authorities there are also encouraged to attract new residents with grants based on their local population.

Many houses could be built on the publicly inaccessible and unattractive parts of the Belt, leaving Green Belt land with genuine natural value alone. In addition, many homes could be built on brownfield sites.

But clearly there’s more to solving the problem than loosening red tape. A tax on the value of land would encourage development on unused land; rising land values would mean rising taxes, so landowners would have to build more homes to offset this.

Finally, government needs to help small builders. Small builders are more active than the bigger builders who, in 2012, controlled about 70% of the market. It could start by requiring local authorities to auction off smaller plots of land, which small builders would find more affordable.

Moreover, since small builders struggled the most during and after the financial crisis, the boom-and-bust cycle of the British economy must be fixed. This could be achieved by breaking up “too-big-to-fail” banks, reducing the deficit, and ending tax subsidies on debt that favour excessive borrowing.

Of course, all of this could take years. For the time being, Ashram, and all the other millions of Britons struggling with housing, might be running out of breathing space.

About Hugo Garvey
Hugo Garvey is a guest contributor.