The UK’s housing shortage is among the worst in Europe, a problem amplified by stagnating growth and rising debt costs, and while a new planning and infrastructure bill is in progress, it would not be enough to dismantle the deep systemic barriers to building homes.
For many in the UK, finding a decent place to live can be harrowing. The country faces a shortfall of more than 4 million homes. More than 160,000 children are stuck in temporary accommodations, with little chance to put down roots. Soaring house prices — eight times the average incomes in some areas — have turned ownership into a fantasy for many. Homelessness has reached record levels.
With developers assured of high demand, the homes that do get built are often no triumph of design or quality. British homes are among the smallest in Europe, with private rentals averaging just 75 square meters. Many find themselves in homes plagued by substandard conditions; in 2023, 14 percent of UK households failed to meet the government’s minimal “decent homes standard.”
The root causes are well known. A discretionary and often arbitrary planning system lends itself to gaming and rent-seeking.
An excessive amount of “green belt” designations — including 88 percent of the land within reasonable commuting distance of London — has impeded construction and raised prices in the most in-demand areas. Well-meaning environmental regulations delay projects and raise costs with questionable justification.
Many of these problems have been worsened by the UK’s system of local governance. Fragmented layers of administration lengthen delays, raise costs, politicize decisions and create perverse incentives.
For instance, without revenue-raising power, local councils often cannot supply adequate infrastructure for large-scale development. If new housing leads to rising living standards, councils might lose out on central government aid that is conditioned on poverty rates.
The Labour government has announced reforms intended to address these challenges, including housing targets for councils and “gray-belt” designations meant to unlock more land for housing. New “golden rules” aim to prevent landowners from blocking projects, while environmental bodies would face limits on their ability to impose costly delays. These steps are promising as far as they go.
However, given the scale of the problem, lawmakers ought to press the government to think bigger. Green-belt reform, especially around major cities like London and Birmingham, should be much more ambitious. As things stand, about 13 percent of the country remains presumptively off-limits to development. That not only raises housing costs, but lengthens commutes, strangles productivity and impedes economic mobility.
At the same time, the government needs to address skewed incentives in the housing market. Under the current policy, landowners can often pocket vast windfalls when land is rezoned, while local authorities mostly bear the costs of supplying the needed infrastructure and services.
The UK should adopt lessons from other countries — including Germany and France — where municipalities are better at keeping a share of the gains from rising land values to fund roads, schools and services, aligning private gain with public good.
Local government reform would be a longer-term project. However, centralized tools such as the National Development Management Policies, introduced in 2022, could be used more aggressively to change incentives at the local level. In countries such as Japan and New Zealand, where supply more closely lines up with demand, national policies have proved helpful in boosting density, encouraging affordable housing and developing underused land.
The stakes are high. For too long, successive governments have promised action while papering over the cracks. As part of Labour’s growth strategy, British Prime Minister Keir Starmer has promised to “back the builders, not the blockers.”
Now is his chance to prove it.
The Editorial Board publishes the views of the editors across a range of national and global affairs.
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