How many people do you know with an after-tax salary of £230,000?
Not many, I expect.
Yet, in 2014, the average asking price for a London property – now just shy of £600,000 – has been rising at £4,405 per week, according to the latest Rightmove figures. That’s an annualised rate of £230,000.
I know that’s only current asking prices and the market does seem to have slowed in London, but the shortage of supply and the surfeit of buyers mean that many of those asking prices are not only being met, but exceeded.
I bet as many as 80% of people you know who own in London couldn’t now afford to buy the house in which they live. It has become almost impossible to work your way on to the ladder.
A quick search online shows two-bed, timber-framed houses for sale for under £20,000; and five-bed, two-storey, 3,500 square-foot timber-framed houses for less than £70,000. Heck, 3D printers can build a home for £3,000.
Houses need not cost a lot of money to build – yet house prices are destroying the prospects of an entire generation. 50% of young people, according to the Evening Standard, now believe they will never own a home.
A house, like a car, should be a depreciating asset. It costs money to maintain, it deteriorates with time. Yet the opposite happens.
The issue is land prices.
The survey you never heard about
The 2011 UK National Ecosystem Assessment made some startling findings about land in England. Unfortunately, in the deluge of data, they got ignored.
The key finding is this: domestic buildings cover just 1.1% of land.
Non-domestic buildings cover another 0.65% and roads make up 2.2%. Just 4% of English land is actually built on.
96% is not.
That 96% is made up of gardens (about 5%), water (about 3%). The rest is ‘green space’.
If England’s 20 million homes cover just 1.1% of its land, you could increase the housing stock by 20% – 4 million homes – and only build on another 0.2% of land. Surely, we can find the space to do this.
Even if you give each home a large garden, you’re still talking less than 1% of English land to increase the housing stock by 20%.
Fly over the UK and you see acre upon acre of barely used land. Some of it ecologically sensitive; some of it is beautiful, of course. But a great deal of it isn’t. And ecological and aesthetic concerns can be addressed – as well they should be.
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The act that made the rich richer
The villain in the piece is the Town and Country Planning Act of 1947. Introduced by the post-war Labour government, the act meant that if you wanted to develop land, owning it was not enough – you had to get planning permission.
It took away the responsibility for decision-making from the individual and, instead, conferred it on regulators. The then Minister of Town and Country Planning, Baron Silkin of Dulwich, said his purpose was “that all the land of the country is used in the best interests of the whole people”.
But we now have a situation where over 70% of UK land is owned by just 6,000 or so landowners (the Crown, large institutions and a few aristocrats, mainly), while the average density of people on one residential acre of British land is 13. We pay an average of £600 in council tax, while each landowner receives about £12,000 in subsidy and a similar amount again from the EU.
This is not “in the best interests of the whole people”.
When you then introduce credit into this tiny pocket of land that we can actually live on, build entire industries around lending money, as well as loose monetary policy, suppressed interest rates, help-to-buy, the aggressive marketing of property to buyers overseas and all the rest of it, it is in evitable that prices are going to be pumped up beyond earnings.
Silkin was also trying to stop private landowners gaining from land value appreciation at the expense of the public purse. But, such is the law of unintended consequences, his act has had the opposite effect.
It has led to huge concentrations of capital and people in areas that are already built-up – especially London – bringing vast unearned wealth to those that own at the expense of those that don’t. It has actually caused the wealth gap to grow.
It’s all very well saying we need to build more homes. What happens then is that politicians and planners turn to large building companies, deals get done, and you get the huge and (in my view) ugly glass-fronted tower blocks that are turning London into Dubai-on-Thames – or you get builders knocking up cramped estates to get the biggest bang per buck of brownfield site. People don’t want these on their doorstep – and so Nimbyism rises.
The hypocrisy of planning is such that there are now government schemes to allow fracking under our must-not-be-touched land – but we can’t build a house on it.
The answer lies with people, not planners
Our most beautiful domestic architecture was predominantly built in the 18th and 19th century, before planning laws, when there was a much more laissez-faire approach. But at present, building is the domain of government and a few large corporations. The more planning there is, the uglier our buildings seem to get.
The answer to expensive housing does not lie in more credit, in more social housing or more large-scale building projects – nor any other kind of government intervention. It lies in cheaper land.
An acre of farmland worth £10,000 becomes an acre of land worth £1m once you get planning permission. It is not “in the best interests of the whole people” to pay that absurd cost of planning regulation; it is in the best interests of the landowner. Get rid of this needless expense and housing becomes affordable again.
With price no longer such a barrier, and small builders and self-builders now able to compete, the result will be more diverse, characterful, affordable and, yes, beautiful.