Yes, Britain does have a bloody housing shortage – and we obviously do need to build more homes

Not enough. Image: Getty.

Why are cartels and monopolies bad? The obvious answer is that they generally take from the poor and give to the rich. That is one good reason.

But economists and competition lawyers learn a second reason. Even if you taxed the cartel profits from the rich and gave them back to the poor, people would overall be worse off than with no cartel.

Cartels and monopolies cause what economists call a “deadweight loss” – they mean that less wealth gets created. Society as a whole is poorer because of them.

The owner of the only bridge across a river will probably raise the toll to make as much money as they can. A carpenter might then decline a small job on the other side. A teacher might decide the pay for an extra hour of maths tuition is not worth the toll fee. Less gets made and done, and society as a whole is worse off, as for centuries when the City of London had a monopoly on bridges.

That is what has happened with housing today. An effective cartel caused by our national failure to ensure plentiful housing as the 1947 planning regime originally intended has led to a massive shortage of housing within reach of the best job opportunities. 

That is still being denied by Ian Mulheirn, most recently in a paper published by CaCHE. Mulheirn works for Tony Blair, who as prime minister oversaw a tripling of house prices. And he claims that Britain actually has surplus housing stock, as housing completions have outstripped household formation, which of course neglects that prices affect how many households there are.

And most of Mulheirn’s alleged “surplus” of homes is far from good job opportunities. As Paul Cheshire points out, twice as many houses were built in Doncaster and Barnsley in the five years to 2013 as in Oxford and Cambridge. National averages tell you nothing about the specifics. On average every human has roughly one ovary and one testicle.

The main reason that we have regional wage differences – and low wages – is that the housing shortage in some places makes it much harder nowadays for people to move around, as the Resolution Foundation has shown. With plentiful homes near good jobs, the wage disparities across the country would shrink because people in places with low-paid jobs would move to places with better pay, as they did for centuries. 

Blocking homes near jobs doesn’t rebalance the country. In a world of network effects and “agglomeration economics”, sadly it does completely the opposite.


Had Mulheirn’s arguments won back then, the Industrial Revolution would never have happened, because he would have been agitating against housing and factories near the mines and other needed inputs.

How bad is the shortage of homes? The total of house prices in the UK exceeds the cost to build those homes today by about three times.

For any normal economist, that is the end of the matter. In any well-functioning market for anything, that does not happen. It does not happen in Atlanta, or Houston. The difference is also far smaller in Tokyo, partly because they build more homes per capita.

Low interest rates have not caused high house prices in Atlanta or Houston, which build abundant housing; nor in Blackpool, because there are already plenty of homes for the people who wish to live there. The long-run relationship between house prices and interest rates flagged by Mulheirn only happens when the supply of housing is needlessly restricted. Interest rates do affect house prices in the UK, because that supply is constrained.

When spatial economists like Professors Paul Cheshire, Christian Hilber or Edward Glaeser talk about a shortage, they are talking about that. Homes cost more than they need to. That's what any economist means by a shortage. No regular economist goes around just counting things. They look at costs and prices.

Mulheirn has proven strangely reluctant to engage with this point, probably because it is fatal to his case.

Solving the politics of where to build homes is hard, of course, especially in the South East. That’s the main reason why we don’t build anywhere near enough. But there is endless room to build more homes, even within existing cities, in popular ways while improving amenity and helping the environment.

Mulheirn’s supposedly killer point is that building 300,000 homes a year would not eliminate the gulf that the failure to build has created between build costs and house prices. But no-one, except Mulheirn’s straw man, is arguing that. In fact from his research you should conclude that we need to be building far more than that. Even back in the 1840s or the 1930s, for example, we managed to grow the national housing stock much faster than today. 

Mr Mulheirn conveniently forgets those decades, and insights from political science and other fields about how to solve the politics of our housing crisis, when blithely asserting that building more homes ‘probably’ wouldn’t help much.

Every home that gets built, especially if it is near good job opportunities, helps to reduce the shortage, compared to not building it. The Redfern Review for which Mulheirn wrote the economic evidence estimated that a 1 per cent increase in the housing stock means a 1.7 per cent decrease in rents and a 1.8 per cent decrease in house prices, holding other factors constant. If we built more homes, they would be cheaper. Most of the rest of his argument is just sophistry.

It is a pity that his opinion piece – not endorsed by the publisher, CaCHE – was not subject to normal double-blind peer review, but then it would probably never have seen the light of day. (EDITOR'S NOTE: Mulheirn has since been in touch to point out that, as a CaCHE publication, his report was subject to the Centre’s normal process of academic  peer review.) The two peer critiques by economists published alongside it strongly disagree with his arguments. They, and the endless other papers debunking Mulheirn’s claims, should get more attention.

John Myers is co-founder of YIMBY Alliance and London YIMBY, which campaigns to end the housing crisis with the support of local people.

 
 
 
 

Here’s how we plant 2 billion more trees in the UK

A tree in Northallerton, North Yorkshire. Image: Getty.

The UK’s official climate advisor, the Committee on Climate Change (CCC), recently published a report outlining how to reduce the 12 per cent of greenhouse gas emissions that come from land use by two thirds by 2050. Alongside recommending cutting meat and dairy consumption by 20 per cent, the report calls for the annual creation of up to 50,000 hectares of broadleaf and conifer woodland for the next three decades. This would increase forest cover from 13 per cent to at least 17 per cent – a level not seen in Britain since before the Norman invasion.

Reforestation at that rate would mean creating roughly the area of the city of Leeds every year for the next three decades. At typical stocking densities of 1,500 stems per hectare, the ambition is to establish some 2.25 billion additional trees. Given that the UK, as with most of Europe, is in the grip of ash dieback, a disease likely to prove fatal for many millions of native ash trees, the scale of the challenge is massive.

On a crowded and intensively farmed island like Britain, unlocking a million and a half hectares of land will be no mean feat. But it’s not impossible – and is an unprecedented opportunity not only to tackle the climate crisis but also the biodiversity crisis that is every bit as detrimental to our wellbeing.

Trees and farms

One million and a half hectares is just 6 per cent of the mainland UK’s land area. To give some sense of perspective on this, 696,000 hectares of “temporary grassland” were registered in 2019. So if land supply is not the problem, what is? Often it’s cultural inertia. Farmers are firmly rooted to the land and perhaps understandably reluctant to stop producing food and instead become foresters. But the choice need not be so binary.

The intensification of agriculture has caused catastrophic declines in many species throughout the UK by reducing vast wooded areas and thousands of miles of hedgerows to small pockets of vegetation, isolating populations and making them more vulnerable to extinction.

Integrating trees with the farmed landscape delivers multiple benefits for farms and the environment. Reforestation doesn’t have to mean a return to the ecologically and culturally inappropriate single-species blocks of non-native conifers, which were planted en masse in the 1970s and 1980s. Incentivised under tax breaks to secure a domestic timber supply, many of the resulting plantations were located in places difficult or in some cases impossible to actually harvest.

Productive farmland needn’t be converted to woodland. Instead, that 4 per cent of land could be found by scattering trees more widely. After all, more trees on farmland is good for business. They prevent soil erosion and the run-off of pollutants, provide shade and shelter for livestock, a useful source of renewable fuel and year-round forage for pollinating insects.

The first tranche of tree planting could involve new hedgerows full of large trees, preferably with wide headlands of permanently untilled soils, providing further wildlife refuge.


Natural regeneration

Where appropriate, new woody habitats can be created simply by stopping how the land is currently used, such as by removing livestock. This process can be helped by scattering seeds in areas where seed sources are low. But patience is a virtue. If people can learn to tolerate less clipped and manicured landscapes, nature can run its own course.

A focus on deliberate tree planting also raises uncomfortable truths. Most trees are planted with an accompanying stake to keep them upright and a plastic shelter that protects the sapling from grazing damage. All too often, these shelters aren’t retrieved. Left to the elements, they break down into ever smaller pieces, and can be swept into rivers and eventually the ocean, where they threaten marine wildlife. Two billion tree shelters is a lot of plastic.

The main reason for using tree shelters at all is because the deer population in the UK is so high that in many places, it is all but impossible to establish new trees. This also has serious implications for existing woodland, which is prevented from naturally regenerating. In time, these trees will age and die, threatening the loss of the woodland itself. Climate change, pests and pathogens and the lack of a coordinated, centrally supported approach to deer management means the outlook for the UK’s existing treescape is uncertain at best.

An ecologically joined-up solution would be to reintroduce the natural predators of deer, such as lynx, wolves, and bears. Whether rewilding should get that far in the UK is still the subject of debate. Before that, perhaps the focus should be on providing the necessary habitat, rich in native trees.

A positive response would be to implement the balanced recommendations, made almost a decade ago in a government review, of creating more new habitat, improving what’s already there, and finding ways to link it together. Bigger, better, and more connected habitats.

But the UK is losing trees at increasing rates and not just through diseases. The recent removal of Victorian-era street trees in Sheffield and many other towns and cities is another issue to contend with. As the climate warms, increasing urban temperatures will mean cities need shade from street trees more than ever.

Trees aren’t the environmental panacea that the politicians might have people believe – even if they do make for great photo opportunities – but we do need more of them. Efforts to expand tree cover are underway across the world and the UK will benefit from contributing its share. Hitting the right balance – some commercial forestry, lots of new native woodland and millions of scattered trees – will be key to maximising the benefits they bring.

Nick Atkinson, Senior Lecturer in Ecology & Conservation, Nottingham Trent University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.