[AJRF]

Thanks for writing this!

> Housing in Britain is expensive because getting planning permission is difficult.

Isn't the real problem that supply is artificially constrained because house prices and the economy are interlinked in a way in a special way in the UK economy, such that the majority of home owners don't want it changed (because more supply == downward pricing pressure)

I think the only entity that could meaningfully change this situation is government, and well it's easier to not upset your donors.

Edit: To be fair to the author, they do mention artificial supply constraints but I think my point stands - it is there by design, too much inertia forcing it to be that way that won't be changed by streamlining the bureaucratic elements

[AJRF]

NIMBYism is not unique, but the importance of house prices to the UK economy is more severe than other countries.

- The UK has a very strong household wealth affect (consumption is tied to house price growth / decline). The US and UK borrowers borrow at a rate against household wealth not seen in other nations (look at the chart on page 6 - https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1117.pdf)

- It has had dramatic, sustained house price growth (400% real price growth since 1980) vs US (200%), France (200%), Germany (150%), Spain (Collapsed in 2008), Italy (Stagnant since 2008)

Some Links:

- https://www.bankofengland.co.uk/-/media/boe/files/working-pa...

- https://www.imf.org/en/Publications/CR/Issues/2016/12/31/Uni...

[immibis]

It's been said about the New Zealand economy that it mainly consists of five people trading houses with each other for ever bigger numbers.

[mytailorisrich]

Supply is somewhat constrained and demand is also artificially inflated (at national level it is 100% caused by immigration, which is kept high by the successive governments).

Everyone relies on the property market going up. Beyond the obvious reasons, another important one is that fixed rate mortgages are not fixed for the life of the mortgage but only for, usually, 2 to 5 years after which rates jump so everyone is continuously worried about remortgaging.

[spacebanana7]

It's curious to think about what house prices in the UK would be like without immigration.

With a sustained negative fertility rate over the past few decades, there could've feasibly been stable prices with no new houses built at all.

[mytailorisrich]

The UK population would have started to decrease naturally I believe around 2024 without immigration. It so happens that the past few years have also seen record high immigration and population growth...

Obviously the property market would be looking very differently if population was decreasing. The whole economy would.

[LurkerAtTheGate]

> Obviously the property market would be looking very differently if population was decreasing. The whole economy would.

Isn't this exactly what's happening in Japan? Govt practically giving away mostly rural homes, as owners died without heirs.

[spacebanana7]

> It so happens that the UK population would have started to decrease naturally I believe around 2024 without immigration

I think it would've been much earlier than that. Cumulative net migration since 2000 is around 8.5 million people. So the UK's current population would be radically lower today without immigration.

https://www.statista.com/statistics/283287/net-migration-fig... (annoyingly the per year figures need to be summed up manually on both this and ONS reports)

[immibis]

Are you trying to paint a conspiracy here? It seems like people just move around if they can, and one pressure that drives people away is a lack of housing even worse than other places' lack of housing. If there's less of a lack of housing (relative to how bad it is everywhere else), of course a place becomes more attractive to move to.

[n4r9]

Well, house prices outside of London have increased roughly in line with inflation over the last couple of decades.

ONS data states that the average house price outside of London and the South East rose from £134k in 2005 to £192k in 2019 [0].

The Bank of England's inflation calculator states that £192k in 2019 costs £139k in 2005 [1].

Looking at London specifically, house prices more than doubled from £303k to £684k over the same period [2]. That's a 63% increase in real terms. Immigration would have some effect on this, but so would UK citizens moving to London or foreign nationals buying up property as an investment.

[0] https://www.ons.gov.uk/economy/inflationandpriceindices/adho...

[1] https://www.bankofengland.co.uk/monetary-policy/inflation/in...

[2] https://www.home.co.uk/guides/house_prices_report.htm?locati...

[spacebanana7]

The data actually implies UK citizens have been consistently moving out of London. The absolute white British population in 1971 was 6,500,000 but was only 3,239,281 in 2021 [1].

Of course not all UK citizens are white British, and the negative fertility rate would've applied downward pressure, and it's conceivable that white Londoners emigrated to Australia etc at a higher rate than other parts of the UK. But none of these factors can really explain a 50% decline in population in the same way that internal migration can. It certainly becomes very difficult to reconcile the numbers if any signifiant number of people from predominantly white areas had been moving into London.

I agree with you that most of the change in average UK house prices is driven by London. In a zero immigration scenario it seems likely that London prices would be radically lower with the rest of the country having much less, if any, change.

[1] https://en.wikipedia.org/wiki/Ethnic_groups_in_London

[n4r9]

Yes, London house prices would likely be lower. But we'd also be poorer on average, since immigrants are a net benefit to the economy. Moreover the combination of a starkly aging population with higher costs of labour would cause a real strain on the public purse, like Japan is seeing. On balance I much prefer the current situation. Though I guess I would say that, having an immigrant parent.

[mytailorisrich]

Net benefit to the economy does not mean net benefit to everyone individually.

That's one reason that made people at the lower end of the payscale vote for Brexit: Immigration keeps wages low.

We're also seeing it since Covid: immigration keeps the GDP (barely) growing while the GDP per capita is decreasing.

The cost is wholesale destruction of local culture, too. London is a city in England but no longer really an English city, for example.

[spacebanana7]

I have an immigrant parent too. Also agree the UK - and Europe generally - would be likely in a state of Japanification without migration.

Still, I think it's valuable to understand the economics at play. Especially in a business context.

[fakedang]

I mean, you're already poorer, given that immigration has depressed wages significantly. Post-Brexit, EU immigration was only replaced by non-EU immigration which has a higher tolerance for lower wages and poorer living conditions. Something that I got to see firsthand a couple of weeks back.

[pyb]

It's true that the general public have a revealed preference for the housing crisis to continue forever.

However in principle, as with many social issues, a motivated actor such as a startup could still have a chance of fixing it.

[lalaithion]

One of the ways in which supply is artificially restricted is that getting planning permission is difficult, so you’re not actually disagreeing with OP

[kijin]

It looks like this startup tried to hack the system by streamlining one of the key mechanisms of artificial constraint: the difficulty of getting permits.

Not a fundamental cure, of course, but it sounds like a promising hack to squeeze out a few more building permits than would otherwise have been issued.

[rob74]

I agree with you that that's probably the real problem, but not that the situation is unique to Britain (although maybe it's worse in Britain then elsewhere)...

[Destiner]

I think you're describing NIMBY, which is more of a US/SF thing (but also is a case in Europe to some extent).

[zihotki]

NIMBY is an universal human concept, it's present everywhere - Europe, Asia, South America. It may come in different flavours but it's everywhere. People don't welcome changes to the surrounding environment if it doesn't benefit them more or less directly.

[dickersnoodle]

It isn't as simple as "doesn't benefit them more or less directly". There are often projects that benefit some people that will actively degrade life for everyone else.

[amy214]

It's one of those things like littering or tragedy of the commons - one instance, by itself, is not a big deal so it's understandable why people might not think much of NIMBYing. But en masse these behaviors are ruinous

[nemomarx]

is that a very special thing? it seems like that in the US too imo

[rhubarbtree]

I’ve posted this before, but I think the reason house prices are expensive in the UK is that they are an asset. If the rich can buy that asset and make a return, they will buy it. So price equilibrium is where rents are at an absolute maximum that can be born by tenants. As the price is determined the potential yield, the price then rises as high as possible.

Building more houses won’t change this situation until the number of houses is greater than the number of tenants. At the point where the number of tenants equals the housing supply, the returns can still be made and prices will be bid up.

The problem is that is a competition between the rich buying as an asset vs the rest of us buying as a home. The only solutions are to reduce or eliminate the possible returns for the rich.

And as posted if the prices are then allowed to fall, the whole economy is in danger, because it is based on the creation of illusory wealth via asset inflation. Remortgaging a house that has risen in price feeds money into the economy, despite no wealth actually being created. And the entire economy is based on this, because the rest of the economy has been destroyed by neoliberalism.

[matt-p]

Yes, it's seriously unhealthy to have most of peoples individual wealth tied up in the fact that there's constrained property supply. If we just built a bunch more housing (or removed net immigration) such that house prices dropped say 25% (which would still be too little, actually), people would be in negative equity, the banks would collapse, government voted out, riots in the street. Yet it's whats needed. If a late 20's professional in London is earning £40,000 after tax they're doing fairly well, yet a one bed flat in zone 2 would still be 10X their annual income.

[automatic6131]

>Building more houses won’t change this situation until the number of houses is greater than the number of tenants.

That's wrong though. Building more houses eases this situation as it approaches the number of tenants. It gets better! Better is good!

And the (perceived) appreciation of houses is also part of the asset price, not just the rental income.

[rhubarbtree]

> Building more houses eases this situation as it approaches the number of tenants. It gets better! Better is good!

Why? I don't see any reason this should be true.

[matt-p]

arguably asset price is built on scarcity vs demand everything else is all second order really.

[rhubarbtree]

No, asset price is built on yield, not on scarcity. That is exactly my point.

It's a bit brain-melting, but once you realise it, the talk of NIMBY-ism etc. is just irrelevant.

If you add more assets with a good yield, assuming that yield is better than bonds etc., then those assets will get bought.

The only other brake on that is diversity of portfolios, but it doesn't strike me as particularly important, especially if many landlords only own a few properties.

[matt-p]

Yes, but isn't yield due to scarcity?

For example right now there's more demand than supply for a 2 bed house for £2000pcm, but if we doubled the supply then there'd be competition and we'd end up at a much lower price?

[jamil7]

This assumes the population of a city is fixed.

[dukeyukey]

> but I think the reason house prices are expensive in the UK is that they are an asset

Houses are also assets in other countries. It's not uniquely a British thing.