From inequality to pollution, the housing crisis sits at the root of a surprising range of problems
If you could wave a magic wand and fix one modern ill, what would it be? Inequality? Pollution? Intergenerational unfairness? The decline of the high street? Suburban ennui? What if you didn’t have to pick, because there was one social problem that lay at the root of all of them?
It’s not exactly news that Britain has a shortage of housing. We’re not building enough, and the homes we do build are often too small and in the wrong places. That means houses are expensive, with the obvious result that we have to spend more on rent and mortgages. But the real costs go far beyond that. Where we live affects our jobs, our families, even our impact on the environment. And just as smoking damages every part of your body, a housing shortage makes all those aspects of our lives worse than they should be, too.
You can see how severe the current shortage is by looking at prices. In London, the cost of a property has risen from an average of £24,000 in 1980 to nearly £500,000 this year. During the same period, average annual wages in the UK rose from £4,370 to £30,200 – so prices in the capital have risen about 1,400 percentage points above nationwide wages. Across the country the picture isn’t much better: prices have risen 900 percentage points above wages. Rents have risen almost in lock-step with wages, so a big share of renters’ collective wage rises over the years has just gone to landlords.
It’s not as though bricks and mortar have suddenly become too expensive. A three-bedroom home can be built for as little as £120,000, a fraction of what it could sell for. We’re not out of space, either. Buildings only cover 1.4% of the UK, and 2% of England – less land than we gain every day when the tide goes out.
No: the real scarcity is of permission to build. A hectare of farmland in Barnet, north London – yes, there is farmland in Barnet – might be worth £20,000, but planning permission is so hard to come by, it would be worth £15-18m overnight if granted, a 900-fold rise. Outside somewhere like Cambridge, the rise might be by “just” 200 times, to £4m or so. Getting permission to build within cities is difficult, too, because existing residents become Nimbys – those who cry, “Not in my back yard!” The effect of this is that housing gets built in more remote areas where opposition is weaker, instead of on well-connected sites where the need is greatest.
Every region in England devotes more land space to road transport than to housing – many devote two or three times as much
That makes housing sprawl the norm across much of Britain, as people are forced to rely on cars, and miss out on the benefits of urban density, such as busier high streets, a wider range of public services, better public transport and greater walkability – with knock-on effects on health and wellbeing. Every region in England devotes more land space to road transport than to housing. Many devote two or three times as much.
More driving means more CO2. City cores are islands of lower CO2 emissions per head, because people can walk and rely on public transport in ways not possible elsewhere. Each person in London, on average, produces roughly a ton of CO2 less every year than the rest of the country – just because they don’t drive as much.
Cities have always drawn those in search of a better life, because they act as cultural and economic melting pots where people can make the most of their talents. This isn’t just a romantic idea. In the US, each doubling of a city’s size is associated with a rise in productivity per person of between 2% and 11%.
In Britain, during the 19th and early 20th centuries, this meant that people of all backgrounds moved from poorer areas to then-booming cities like Manchester, Birmingham, and Glasgow. Rapid influxes of people could sometimes make for grim conditions – but these improved with the prosperity and innovation that larger populations brought. Today it is mainly only highly educated people who can find jobs that pay well enough to afford to live in city centres. Many who could have entered prosperous job markets and improved their skills never get the chance, and the rest of us miss out on the benefits of what they might have achieved. A large chunk of the additional value created by those who do move goes towards securing more expensive housing, with landowners capturing much of the productivity gain that would otherwise have fed through into higher living standards. Matthew Rognlie, an economist at Northwestern University, has shown that rising wealth inequality has been almost entirely driven by property wealth.
Rising wealth inequality has been almost entirely driven by property wealth
Innovation suffers, too. The most innovative places in history, such as Renaissance Florence or the Low Countries in the 16th and 17th century, thrived because of the mixing of creative people who combined knowledge in unusual ways, such as the master craftsmen and mathematicians who made globes and other navigational equipment in 16th-century Leuven. Technological advances like those are far more common in dense, diverse cities than in sprawling ones. And ideas-focused businesses succeed when they’re located in clusters near each other. For software companies, the benefits kick in for companies located within ten-miles of each other. In businesses like advertising, it’s just half a mile — hence the importance of Madison Avenue, which gave its name to the TV programme Mad Men, to America’s advertising industry.
The UK is not alone in suffering from a housing shortage. The US has the same problem in places such as New York City and the San Francisco Bay area. One study suggested that, if it tackled these shortages, the country could be 8.9% richer; in another the boost to incomes was calculated at 25%.
Applied to the UK, these estimates imply that fixing our housing shortage could add somewhere between £3,000 and £8,500 to the UK’s annual output per person. That would be a huge improvement to living standards. Even the lower estimate would amount to more than the last 10 years of economic growth (pre‑Covid) put together.
With such a large reward on the table, overcoming opposition to new housing should be a high priority. The solution may lie in changing the rules of the game so that Nimbys become Yimbys and say: “Yes in my back yard!” instead.
One proposal would let residents vote directly to allow more housing on their street, so they could share in the increase in value that comes with the ability to build more densely. Others include letting local councils capture more of the gains that come once planning permission is granted, or allowing more dense housing to be built on the urban wasteland that often sits behind residential streets.
Whatever the solution, the damage done by Britain’s housing shortage cannot be overstated. It disrupts our lives in countless ways. As long as it continues, we are poorer, less equal, more polluting and more unhappy as a result. But, in a way, that’s a reason to be optimistic. It means that the gains from fixing this one problem could be huge – bigger than anyone imagined.
The Death and Life of Great American Cities by Jane Jacobs (Bodley Head, £20)
Triumph of the City by Edward Glaeser (Pan, £9.99)
Seeing Like a State by James C Scott (Yale, £14.99)