Scarcity is spreading through the economy - and it might boost housing supply

For those of us working in the housing sector, scarcity is not new. It is almost 20 years since Kate Barker published her report on housing, concluding that a key reason why England’s house prices had been increasing at a rate more than double the EU average was a shortage of supply. Barker also observed that the planning system was a key barrier to building more homes.

Since then, much has changed but little has been achieved.

The number of new homes being built each year is barely higher than 2001’s post-war low which prompted the government to commission the Barker Review in the first place.

The efforts of successive governments to increase the supply of new homes have been met with a wall of resistance. Older homeowners who perceive themselves as the losers from new house building are more politically powerful than the young who have to suffer the consequences of high house prices.

Those shortages which we are so familiar with in the housing market are beginning to become apparent in other sectors of the economy. The logistics sector is being squeezed by a shortage of distribution space. The lack of lab space in the Oxford-Cambridge arc is forcing life sciences businesses to move overseas. More than three decades after the last reservoir was opened, at least 30 new ones are needed to satisfy the demand for water. 

We don’t seem to have enough of anything, and that is a significant drag on economic performance. But it is always darkest just before the dawn.

Most pressing of all is the need for new sources of energy generation - wind, solar, tidal and nuclear power all need to be part of the mix as the economy decarbonises, and we face rampant energy price inflation.

We don’t seem to have enough of anything, and that is a significant drag on economic performance. But it is always darkest just before the dawn.

Those shortages will directly impact many more people than the housing crisis. Even those wealthy home owners who are most likely to object to planning applications for new homes will feel the pinch of rising energy bills, delayed Amazon deliveries and water rationing. Addressing those shortages can help the government deliver the economic growth it so desperately needs.

That might just provide political space to make the changes we need to see across the planning system as a whole. It is harder to claim there is no systemic issue when shortages are so obvious across the economy.

Instead of housing supply being the poster child of planning reform, the government can focus its attention on those other shortages. Housing can be swept along in their wake.

Addressing all those shortages is actually quite simple. We need to abolish the scarcity mindset and plan to deliver surplus supply. Having a surplus of something is usually seen as a positive as a sign of wealth. We don’t complain about having surplus food supplies or surplus hospital beds. Yet when it comes to development, it is viewed as a bad thing.

The result is a planning system that often sets out to deliver the bare minimum development necessary. A decade ago, a planning inspector concluded that there was “no immediate need” for a reservoir in Oxfordshire; now we have water shortages.

Local plans typically forecast future demand for employment space by assuming historic take-up rates will continue, providing no flexibility for the sort of step-change in demand the logistics sector has experienced. And, of course, local plans all too often aim to deliver the bare minimum number of new homes they think they can justify.

Just this week, Bury Council in Greater Manchester - which has one of the worst records on housing delivery in the country - proposed removing a 1,250-home site from an already submitted Plan because they no longer think it is needed. We know that between 10% and 20% of all allocated housing sites don’t deliver for a whole variety of perfectly benign reasons - from legal issues, to technical constraints or landowners selling for an alternative use. Yet local plans all too often allocate enough land to deliver just a coffee spoon’s worth more than their housing target.  

Instead of housing supply being the poster child of planning reform, the government can focus its attention on those other shortages. Housing can be swept along in their wake.

We need to stop seeing surpluses as something to be avoided and, instead, view them as something to embrace.

The government can use national policy to ensure local authorities allocate enough land to deliver a healthy surplus over and above whatever they think their need for lab space or logistics sites – or homes - might be. There are more than enough suitable sites to meet the need for all those things - the only reason they aren’t being developed is because the planning system won’t let them.

With scarcity so widespread, and the impacts being felt by so many, the government might just have the political space to boost the supply of development of all types - including new homes.

All they need to do is embrace surpluses rather than scarcity. 

Paul Smith, managing director, The Strategic Land Group