7 February 2017

The market, not government, must dictate housing policy


The government has just treated us to their new and exciting White Paper, “Fixing Our Broken Housing Market”. This is their plan which is going to make sure we all have the roof of our choice over our heads.

There are bits and pieces of it which appear just fine – why not allow an extra floor or two of development in already built up areas? However, the real problem is that the structure is built upon a delusion. That delusion being that we should, or even can, plan how and where people should live.

To do so is to deny the very basics of having a market economy at all. We all know of the disasters that came from the Soviets deciding what people would like to eat and planning for it.

Many of us have driven the wreck that British Leyland planned we would all like to drive, and every passing day produces more complaints about how the NHS plans we should all be treated.

All of these problems have the same source – central planning.

The truth about us human beings is that no one really knows what we want. As Hayek pointed out no one can actually can have that information. Thus planning in any detailed manner is just not possible. In fact it’s worse – often our wants only emerge from the market process itself.

No one actually knew that the middle classes would clamour to live in ribbon developments in South East England suburbia. Not until a few speculative builders started putting them up, making a little bet on the spread of the motor car in the 1930s, only to find that they were immensely popular.

Those Edwardian blocks of mansion flats were speculative operations, the grand squares of Georgian London ditto. The actual housing we’ve got that people fight tooth and nail to occupy was all knocked up by people on the off chance that someone would like it. Some of it them did indeed like it which is why we’ve still got those very same houses.

At which point we have the government admitting today that we have a housing problem, which indeed we do. We want more houses and we also want fewer of them where the population used to be and more of them where it wants to be; less in the North, more in the South.

That admission of the problem is a start, but the government is still pursuing the wrong solution, the wrong even beginnings to the possibility of one:

The paper announces; “At the moment, some local authorities can duck potentially difficult decisions, because they are free to come up with their own methodology for calculating ‘objectively assessed need’. So, we are going to consult on a new standard methodology for calculating ‘objectively assessed need’, and encourage councils to plan on this basis.”

‘Objective need’ is conditional and not something that can be objectively planned. Some will prefer to live out in the country, others hugger mugger in the urban core. Unless you survey everyone – and we can’t, see Hayek – we cannot know what all desire. And even if we do survey, people tend to lie to those with clipboards.

Who wants to live where, is something that is emergent from the system, not something that can be planned before we build it. Hence the paper’s next idea, “If we are to build the homes this country needs, we need to make sure that enough land is released in the right places, that the best possible use is made of that land, and that local communities have control over where development goes and what it looks like,”  just isn’t going to work.

Likewise its insistence that, “Up-to-date plans are essential because they provide clarity to communities and developers about where homes should be built and where not, so that development is planned rather than the result of speculative applications,” is little different to Nicolas Maduro insisting he knows what the correct price of rice in Caracas is.

The DCLG’s paper misses the glory of a market economy in the first place. It works, not by someone with too little information deciding what all may have, but by excitable, hopeful and possibly even deluded speculators making things and then seeing if the populace like them.

And it’s worth noting that we’ve had a planned housing system for some 70 years now which is what has brought us to the pretty pass we are in. The solution to it is to stop doing the planning that doesn’t work and return to a market system which will take care of the problem.

As is so often the case we should not be having arguments about what government should be doing. Rather, an insistence that government stop what it already does. In this case it is the planning system itself which causes the British housing problem. The solution therefore is not to have the planning system.

We will begin a solution to our habitation woes some nanoseconds after blowing up the Town and Country Planning Act 1947 and not a moment before that. The government should be repealing this Act and all its successors.

Anything else, as with this White Paper today, is to fail that most basic of tests;  if it is the government causing the problem, then by far the best solution is to stop the government causing the problem.

Tim Worstall is senior fellow at the Adam Smith Institute