Economist: planning system a block on housing growth

The UK's planning system is a block in the way of meeting the UK's demand for housing, a leading economist has told a House of Lords committee.

New homes: economist blames planning controls for supply shortfall
New homes: economist blames planning controls for supply shortfall

Martin Wolf, also a Financial Times columnist, gave evidence to the Lords’ Economic Affairs Committee as part of an inquiry into the economics of the UK housing market yesterday.

Asked by committee member Baroness Blackstone how far the planning system is a block to building enough houses for the future, Wolf said: "It seems to me pretty clear that it is."

In the case of London, he added that "the difference in the value of the land which is built upon next to the land which can’t be built upon is so vast that it’s impossible not to conclude that the land price in the city overall would fall if more land were made available and used for homes."

However, Dame Kate Barker, the author of Labour’s 2004 review into housing supply and former member of the Bank of England’s monetary policy committee, warned against blaming the planning system as a whole, highlighting the conflict between the nationally agreed housing need, and the struggle local authorities face to find "places for homes without being thrown out at the next local election."

Barker added that stronger compulsory purchase powers could be helpful and would be "a good way forward to develop more housing at scale."

Barker also told the hearing that she was skeptical about the government’s focus on supporting buyers to get a foot onto the housing ladder.

Chancellor George Osborne last week announced an expansion of the help-to-buy subsidised mortgage scheme in his autumn statement.

But Barker said: "I do feel uncomfortable with a set of policies which seem designed to be supportive of reasonably well-off people who are just on the cusp of buying, and need that little nudge to get over the edge, at the expense of people who are stuck in the rental sector."

"In the US when they did that, it didn’t end well," she said, alluding to the government-policies to boost homeownership that contributed to the sub-prime mortgage crisis.

She added that "there are many other ways to use the money."

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