UK Housing and Planning Policies: the evidence from economic research
Paper No' CEPEA033
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Friday 24th April 2015
Britain's Housing Crisis - and the fake solutions on offer:New #ElectionEconomics policy briefing from the Centre for Economic Performance
UK Housing and Planning Policies: The evidence from economic research
Housing affordability is a key concern of an ever-larger fraction of UK voters who are crammed into artificially limited space. At the same time, a lot of wealth lies in housing assets and there are many vested interests in keeping things this way, such as current homeowners and private landlords.
Substantive reforms could solve the housing crisis, but politicians of all stripes back away from such reforms out of fear of being demonised by the vested interests. Instead, proposed policies tend to tackle the symptoms - rather than the causes - of the UK's housing affordability crisis.
These are among the conclusions of a new report from the Centre for Economic Performance (CEP) - the latest in a series of background briefings on key policy issues in the May 2015 UK general election. Among the findings:
"Research points clearly to the UK's rigid planning system as the main cause of the housing affordability crisis. Demand-side policies such as Help-to-Buy don't work in this setting because they merely increase house prices.
"The current property-related taxes are inefficient, especially the council tax and the stamp duty land tax. While the former is regressive and does not provide sufficient incentives to permit development at the local level, the latter hampers household mobility and generates distortions in the housing markets. Importantly, it discourages downsizing of the elderly and upsizing of expanding young families.
"Solutions to the housing affordability crisis lie in a set of more supply-side friendly policies. But the obstacles to moving to such policies are vast since these policies antagonise vested interests, which appear to have been created in perpetuity.
"Yet the long-run consequences of political inaction - and the continuation of excessively low rates of new building - could prove socially explosive and economically traumatic."
For further information, contact:Christian Hilber
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