Relaxing green belt laws might work for London – but what about the rest of the UK?

Look at the poor innocent greenery. Do you really want to build on this? Image: Hidden London.

The economics of supply and demand is a fickle friend to urban planners everywhere.

Say you work in a city with traffic jams, and the council decides to increase road capacity. In the short run, productivity improves, as getting about the city becomes easier. But in the long run, the demand for roads increases as travelling by car becomes a more viable option for an increased number of commuters.

Previously, these commuters might have taken public transport, or chosen not to travel. However, now that road capacity is greater, they are compelled to drive.

This results in a return to the status quo of traffic jams, just on bigger roads. This phenomenon is ubiquitous in American cities such as Los Angeles, where public transport plays second fiddle to private.

The same is true for housing. When demand for housing is high, but supply is low, common sense would dictate that housing supply ought to be increased in the areas where demand is greatest. However, in the long run, much like on an American highway, housing demand will increase once more – because the area where demand is greatest is perceived as more affordable than before.

Brits who might otherwise resign themselves to a semi in Luton might jump at the chance to own property in London if it was presented as being affordable. People change their habits in response to economic signals.

This is what economists call “animal spirits”. Consumers are more confident that they can buy that house, or drive that car, even when the prices have hardly changed, simply because an announced change in supply triggers changes in consumer behaviour.

In fact, we British ought to know this. After the Second World War, the United Kingdom experienced an unprecedented increase in house building.

Metro-Land, part of the vast surge of housebuilding in the 20th century. Image: Cyril A Wilkinson.

Annoyingly, this didn’t lead to any long-term mitigation of the absurd house prices that we face today. The demand for housing in London and the South East is so great that, even after paving over most of Middlesex, we still couldn’t make London affordable in the long run.

And yet, here we are, again discussing paving something over. This time, the mildly inaccurately titled green belt is in the iron sights of house hunters.

Fair enough ­– demand in London is reaching a fever pitch, the supply of housing has been out of step for decades, and the Tories are quite rightly afraid that young people’s inability to get on the property ladder is haemorrhaging their poll ratings among the under-40s.

This seems like a reasonable idea. Parts of the green belt are hardly that green, we don’t need to use up that much of it, and large swathes of green belt are currently located within reach of a Tube station.

Yet with that admission, the problem becomes clear: green belts are not created equal. “Loosening the green belt” is so often just a turn of phrase for removing the Metropolitan Green Belt (the one that surrounds London), because it is under the greatest duress.

Although other green belts were considered important at the time of their implementation, they do not command the same gravitas and controversy afforded by London’s own.

However, a policy to loosen London’s belt alone could be construed as unfair and partisan. Therefore, such a policy would probably invoke green belts across the United Kingdom. How would different green belts be affected?

Railway line extensions into Middlesex led to huge levels of home-building. Image: Metropolitan Railway.

The Metropolitan Green Belt would clearly experience a high level of development as soon as possible, as relatively cheap sites became available in boroughs such as Barnet and Bromley.

This would result in increased economic activity in these areas, due to greater population density. At this point, animal spirits come into play. A greater population density in and around London would cement the South East’s position as the economic centre of the United Kingdom.

Therefore, the demand for housing in the South East would once again increase over time. This means that any serious reduction in prices promised by a loosening of the green belt would likely be less than expected.

Comparatively, a loosening of the green belt in other parts of the United Kingdom, while potentially valuable, would hardly touch the levels of population growth and boosted economic activity experienced around the capital. It could be argued that initiatives such as HS2 and the long-term development of KIBs (Knowledge Intensive Business Services) could improve the situation across the United Kingdom, but these initiatives are only designed for the Birmingham and Manchester-type cities of today – rather than the grander cities that a loosening of the green belt presupposes.


So: loosening the green belt is an inherently London-centric proposal. Just because demand is greatest in the capital, that does not mean that freeing up housing supply is the best blanket policy for solving structural housing issues across the entire country, especially when we admit that solving said structural issues is rather difficult.

Workers have been migrating across the North-South divide for centuries, moving to where they believe the best employment opportunities reside, wilfully abandoning their homes in the belief that the grass is greener in the South.

Opening up the green belt for development now would encourage that mentality, while depriving northern cities of a chance to develop themselves into true regional powerhouses where people want to stay and work. That chance should surely come first.

If we want to increase opportunities for growth in London, we need to make sure that the same opportunities exist across the United Kingdom. Otherwise, we risk perpetuating centuries-old geographical inequalities into the future, simply by opening up the green belt. Those arent the values that ‘London Is Open’ stands for.

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To fix the housing crisis, we need to decide what success would look like

Building houses in Ilford, 1947. Image: Getty.

Recent years have seen growing public and political recognition that there is a crisis in housing. This has led to a widening debate on the causes and potential solutions.

However, within this debate there has been little in the way of a consensus view of what constitutes the current housing crisis – or what a “crisis-free” housing system might look like. There seems little clear idea of any measurable goal. The nearest we have as a target to aim at has been a series of aspirational numbers for new-build homes, with limited clarity on what to expect if we were to hit those numbers.

Clarity about what success would look like is essential. Without a framework for what we need and want from housing, our ability to understand and fix it appropriately will be compromised. A lack of clarity also increases the risk of unintended consequences from misguided policy interventions.

The current housing debate is, to quote UCL’s Michael Edwards, “bedevilled by rival simplifications”. There are several, quite often competing explanations for why we have a housing crisis. For many it is our failure to build homes at the same rate as projected household formation. This failure might be assigned to the planning system, the greenbelt, housebuilder business models, the land market, or NIMBYs.

For others, the crisis is a result of falling interest rates, rising credit supply, low income growth, wealth and income inequality, tax incentives, or simply our fixation on house price growth. For some, there is no shortage of homes, rather a poor distribution. And for others there isn’t really a housing crisis.

Despite the apparent contradictions in this mix of positions, each of the arguments that support these various views may hold significant elements of truth. Housing is a complex and interconnected system within the economy and society. There is no simple single housing market: there are multiple markets defined by location, property type, tenure, and price. Therefore, there is no simple single housing crisis. Instead we have multiple overlapping issues affecting different parts of the country in different ways and to varying degrees.

There may be factors that influence all housing markets across the UK, indeed across much of the globe. There will be others that impact more locally and within specific housing sectors.

So, for instance, there is growing acceptance by many experts that the cost and availability of credit has been one of the biggest, if not the biggest, drivers of increases in national house prices over the last twenty years.


But it is not the only factor. The growth in buy-to-let has contributed to the financialisation of housing, with homes increasingly thought of as an investment rather than a place for people to live. A lack of supply is predominantly an issue for London and its surrounds, but there are localised shortages elsewhere, particularly of specific types or tenure of homes.

Planning (including a lack of) and the land market limit the responsiveness of supply to rising demand. Housing is unevenly distributed, mostly across generations but also spatially and within generations. Some areas don’t need a net increase in housing but desperately need existing poor-quality homes improved or replaced. In many areas the biggest issue is low (or negative) income growth and employment insecurity.

All these issues and others play a part in defining “the housing crisis”. Having a framework for what we need and want from housing, combined with an understanding of the complexities and interactions that run through the housing market, is essential to resolving the problems they create.

The problem with ‘households’

A misunderstanding of the complexities of housing can be found in one of the most frequently stated explanations for the crisis: a lack of new supply compared with household projections.

Unfortunately, this argument is flawed. Household projections are not a measure of housing demand. The effective demand for new housing is determined by the number of people or companies willing and financially able to buy property. Meanwhile new supply only accounts for around 12 per cent of total transactions and probably less of available homes for sale.

Importantly, even if some analysis may suggest there is no shortage of supply, that does not mean there is no need for new supply. Household projections are a statistical construct based on the past, not a direct measure of future housing demand. But they are still important if used appropriately within a framework for what we need and want from housing.

If we are more explicit about the role of household projections in measuring housing need and the assumptions they contain, then the ‘supply versus household projections’ argument might be recast as a debate on changing household sizes and the consumption of housing (both in terms of space and multiple properties).

This then implies that we should be clearer about the minimum acceptable amount of housing people need, while also accounting for what they want. Should younger people still expect to form households at the same rate and size as their parents? The assumptions and projections around future household sizes should be moved from the background, where they are typically only discussed by planners and researchers, to the centre of the debate.

They should be just one part of a framework for success that explicitly states what we need and want from housing – not just in terms of size but also cost, tenure, quality, security, and location – and better defines the minimum we are prepared to accept. That will provide a clearer understanding of where housing is failing to meet those requirements and help set objectives for how to fix it. These could then be applied appropriately across different markets.

“Rather than trying to return to the relatively short-lived 20th century ideal of mass home-ownership, perhaps we should be focussing our efforts on making renting cheaper”

If measurement against the framework shows that households are not able to form at an appropriate rate and size relative to what they need, then we probably need to increase supply while possibly encouraging older households to move out of larger homes. If rents are too expensive then we may need to reform the rental sectors and increase supply. If housing quality is poor, then we need to work harder at improving and replacing existing stock. If many areas are struggling due to low (or negative) income growth and employment insecurity, then we probably need to look beyond just housing. It might even question whether we need to rebalance the economy and infrastructure investment away from London and its commuter zone.

Having a framework for success may even highlight which issues we can fix and which we can’t. For example, it looks likely that we are stuck with a low interest rate and hence high house price to income market. Under those conditions, prospective first-time buyers will continue to struggle to raise a deposit and access home-ownership irrespective of how much new supply can be realistically delivered.

Rather than trying to return to the relatively short-lived 20th century ideal of mass home-ownership, perhaps we should be focussing our efforts on making renting cheaper, higher quality, and more secure as a long-term home. Increasing new supply would be an important tool in achieving that outcome.

When we have a framework for what success could look like, our ability to understand and fix housing appropriately will be dramatically improved. It would be an important step towards making housing available, affordable, and appropriate for everyone that needs it. It would also be more useful than simply setting a nice round number national target for new homes.

Neal Hudson is an independent housing analyst, who tweets as @resi_analyst. This article originally appeared on his blog.