An Effective Prohibition on Housebuilding is a Terrible Case of Intergenerational Injustice

It is said that ‘Society grows great when men plant trees whose shade they will never enjoy’. This perhaps hackneyed adage can be traced back as far as the writings of Cicero who, in one essay on old age, praises farmers who plant trees to serve future generations. However trite the expression, it conveys a basic truth: that each generation has an obligation to leave their children better opportunities and circumstances than they themselves enjoyed. Or, at the very least, not to actively sabotage the prospects of future generations; yet the planning policies of postwar governments have done exactly that.

In 1999, average house prices in England were 4.37 times larger than average incomes, in 2022 that ratio stands at 8.44, according to a 2023 ONS report. In that same period, house prices have increased by a factor of four and, whilst incomes in England have significantly outpaced inflation, they have not increased as fast as house prices. As a result, in London today, the median rent will absorb almost 40% of the median renter’s income. The impacts are, of course, profoundly regressive. For those earning the bottom third of incomes in London, a median-priced home costs over 20 years of income. 

The housing crisis is not an unhappy accident: it is the conscious and deliberate – if not explicit – policy of the British government since the second world war. As Robert Colvile (CPS) succinctly put it last year “Supply, demand, it’s a thing”, and if you aggressively restrict the supply of housing then you inevitably will raise prices significantly. In doing so, you unjustly reward those who currently hold wealth, creating an asset which can only rise in value, whilst artificially and arbitrarily punishing those who weren’t around to get on the ladder 20 years ago.

This deliberate attempt to restrict construction began under the Atlee government, which in 1947 passed the Town and Country Planning Act, a piece of legislation both badly motivated and profoundly destructive. The government’s intention was in large part to constrain urban development, and to do so they effectively severed the link between ownership of land and the right to build as you pleased. The TCPA created the discretionary planning system which exists in Britain to this day, where developers need case-by-case approval for development, creating excessive uncertainty and empowering the petty bureaucracy of local government to block construction. Discretionary systems leave planning decisions to the whims of local elected officials who, quite obviously, always have incentives to resist development – which provides diffuse, long-term benefits but concentrated inconvenience to the few local residents in their electorate. Zoning systems, in contrast, can reduce bureaucracy and provide consistency for developers by guaranteeing that, if they meet certain basic requirements, their development faces certain approval. A full and liberal zoning system has described as too radical for the UK, despite the incredible success of such systems in countries like Japan.

The patently illiberal Town and Country Planning Act has achieved its objective, as analysis by the Centre for Cities (a think-tank) has shown, with total housebuilding falling by 35% after the TCPA 1947 (notwithstanding the Great Depression dominating the pre-TCPA data-period, and the massive need for housebuilding after devastation in WW2). As Paul Johnson (ex-head of the IFS) has pointed out, there is now almost no connection in Britain between house prices (a proxy for demand) and construction, which signals almost perfectly inelastic supply. One most resist the temptation to overcomplicate the Housing Crisis, it is actually quite simple: the government has effectively made construction impossible, and so house prices are very expensive. If the government banned the production of cars or televisions, nobody would be surprised if cars and televisions became more expensive. The same logic applies here. 

The result of all this is a profound case of intergenerational injustice. Discretionary zoning has subjected the country to a tyranny of the aesthetic and financial preferences of the established middle class, hyper-engaged in local government and perennially willing to block a development that might provide homes for young families. Politicians simply cannot bring themselves to say they want house prices to come down, since doing so might hurt the financial interest of established homeowners. This has been seen in Canada where Carney’s new housing minister said house prices don’t need to fall in order to solve the housing crisis. Yet this is simply impossible, it almost definitionally untrue that houses can become more affordable without falling in prices, i.e. becoming cheaper. The myth that ‘Affordable Housing’ can square this circle is just that, a myth. A myth which belies the litany of studies showing that housebuilding – any housebuilding – will reduce prices and raise affordability.

It is perhaps the foundational truth of liberalism that one should not be able to interfere arbitrarily in the lives of others. Yet our planning system allows just that. If I want to build an apartment building on my own land, with my own money, then I should not have to persuade my local council that such activity is legitimate. The housing crisis is the greatest case of intergenerational injustice in Britain today, and the sooner the government liberalises its housing policy, the sooner the lives of ordinary young people can start to improve.