Abstract
ABSTRACTProblems of housing affordability have been afflicting parts of the UK, especially the South East of England, for a number of years. The problem is closely related to shortages in housing supply, which are, in turn, largely associated with constraints imposed by the English land planning system. A leading theory for explaining these constraints posits that they reflect political economy forces that convey the interests of current homeowners to planning decisions in disproportionate and excessively influential ways. We test this theory by examining survey data on public attitudes to house building in local communities; and by investigating whether these attitudes are related to local planning decisions. We find that there is a tendency for owner-occupiers to express greater opposition to local house building and that, in the decade to 2011, the housing stock grew significantly less in local authorities with higher proportions of owner-occupiers among local households. The results suggest the risk that planning decisions might have been distorted in favour of current homeowners is real and economically significant. We discuss a range of historical, socio-economic and policy trends that help explain why successive governments of various stripes have been reluctant to address head-on problems in housing supply and put a curb on house prices.
Highlights
Problems of housing affordability have been afflicting parts of UK for a number of years and are especially acute for families with low-to-modest incomes (Barker 2004).1 The growth and volatility of real house prices over the last 40 years in the UK are among the top of the Organisation for Economic Co-operation and Development rankings (Figure A1)
More than 3.3 m adults between the ages of 20 and 34 were living with parents in 2013 – more than a quarter of the total – according to data from the Labour Force Survey.3. Among those who have afforded to buy a house, it has been estimated that the number of households struggling to keep up with their mortgage payments is likely to double to 2.3 million by 2018 under a scenario of small, gradual interest rate rises as suggested by the Bank of England (Blacklock and Whittaker 2014)
Among the existing evidence we review in this paper, three such features standout: (i) weak or absent city-wide/regional planning coordination; (ii) high fiscal centralisation and (iii) ‘development control’
Summary
Problems of housing affordability have been afflicting parts of UK for a number of years and are especially acute for families with low-to-modest incomes (Barker 2004). The growth and volatility of real house prices over the last 40 years in the UK are among the top of the Organisation for Economic Co-operation and Development rankings (Figure A1). We discuss a set of historical, background trends in public attitudes towards homeownership, government policy and the economy that were highly influential in shaping the current political economy landscape around housing in England: for example, the long-term rise of homeownership, especially in the second half of the last century, incentivised by an array of policy initiatives; the decline in the construction of council houses in the 1970s; the vast increase in the market value of the housing assets of the middle classes from the late 1970s onwards, and with it, the spreading of perceptions in the electorate that homeownership is a golden ticket for individual prosperity; the ever greater reliance of the financial sector on property prices; and the rise of local community opposition to house building These trends help to explain why successive governments of various stripes have been reluctant to address head-on problems in housing supply and, put a curb on house prices. These reforms represent a significant departure from the ‘localism agenda’ of 2010 of the previous government
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