Housing has long been weaponised by the enemies of free society. The belief that housing is too important to leave in the hands of market forces legitimises the dismantling of private property and individual liberty – and so is an idea classical liberals must forever resist.
To Friedrich Engels, housing in the hands of the market led to a simple outcome: exploitation. His 1872 ‘The Housing Question’ described a system plagued by terminal ills. Through the capitalist’s lust for profit, housing prices become inflated far beyond affordable levels, leading to those at the bottom of society being stuck in an inescapable loop of destitution. His solution is simple: remove the market from the equation and consolidate this power under state hands.
Such thinking continues to permeate through radical fringes of thinking. Resident comrade Grace Blakeley has recently expressed her support for a ‘fair, just and sustainable housing system’. But her scathing attack on developer greed and those evil pensioners fools nobody.
Blakeley is wholly correct in her observation that our housing system fails to meet societal demands, with prices increasing some 160 per cent in real terms since 1996, consequently leading to the number of young homeowners more than halving. However, her argument that market forces are the perpetrator entirely lacks economic rigour.
Over many years, the supply of housing has lagged significantly behind growth in demand. Between 1967 and 1991, the UK built approximately 5.7 million new homes with population growth of 4.5 per cent. However, with the near 15 per cent growth in population between 1991 and 2016, we built just 3.5 million new dwellings.
At the core of the unaffordable housing market is simple supply and demand. Too many people chasing too few goods, leading to inevitable price rises.
Beyond this, the argument against private development presents a complete misrepresentation of market forces. Under conditions of laissez-faire, prices have a natural tendency downwards. Guided by free-market competition, the current price of a television is some 99 percent lower in value today than in 1950. Blaming free-market capitalism for our current housing crisis is entirely void of reason and historical precedent.
So why is there a lack of homes being built? We arrive at our usual suspect—ham-fisted state intervention.
Unlike our compatriots on the continental mainland, we have a highly obtrusive and bureaucratic system of home building. Whereas nations such as Germany have clear lines of transparency through ‘zonal planning’—where developers clearly know where they can and can not build homes—the United Kingdom has a discretionary ‘case-by-case’ system. Through this, developers must approach local government to seek approval, unsurprisingly leading to dithering, delay and a long backlog.
To circumvent this, large incumbent firms ‘volume purchase’ a large number of plots at once (accepting few may be rejected) in order to spread out building projects and reduce ‘planning risk’. Unfortunately, small developers in desperate need of consistent cash flow are unable to purchase multiple plots at once – and so are squeezed out of the market. While thousands of small developers have gone bankrupt over the past decade, profits of the top 5 home builders have more than quintupled.
The impact of this is exacerbated by the despotic ‘Green Belt’. In the midst of obtuse planning laws decreed by a government seventy years ago, home building has been stifled. Unlocking just 3.7 percent of this area can provide housing for more than two and a half million people, and will help to balance the state-sanctioned distortion between supply and demand.
Government intervention in housing has dissipated the dream of homeownership for millions of people. We must succeed in building more houses to ensure the incantations of Engels are kept out of mainstream discourse. The kettle of home building is boiling, it is pivotal the government remove the brick they are holding on its lid.