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If the recovery falters, blame the NIMBYs!

The champagne corks in Downing Street must keep popping lately: unemployment is falling faster than anyone could have dreamed of a couple of years ago, economic growth is the fastest in the G7, the long awaited rise in living standards over and above inflation happened last month... Almost every bit of economic news is good at the moment and about time too, says Peter Burgess of Retail Human Resources.

We have suffered the worst economic disaster since the 1930s and government debt is now at a level not seen in peacetime. Indeed, it compares with the debt after the Second World War. Some of the blame does belong to Gordon Brown for spending too much when times were good.

However, it would be unfair to blame this crisis on any single political party or, for once, on politicians at all. This was a crisis made in Wall Street, The City and other leading financial centres and whilst perpetual bank bashing won’t get us anywhere, we must never forget who it was that got us into this mess and we must make sure they don’t do it again. Which brings me nicely to the theme of this article.

The real danger

The economy is doing extremely well and there is the prospect of an almost golden decade ahead of us, save for one thing; house prices! In particular, house prices in London.

Prices are rocketing in the capital and this is now rippling outwards to the rest of the country. Great if you’ve just bought your house but a disaster if you’re trying to get on the property ladder. Worse still, as house prices rise, so do rentals and we no longer have the cushion of social housing that meant a significant part of the economy was immune to these shocks.

We have seen this happen before and the last recession in the UK in 1990 was largely caused by house prices ballooning in the ‘80s and then crashing in ‘89 leaving millions with negative equity (where your house is worth less than your mortgage). All the signs are that this is happening again and we are running like lemmings towards the next recession before we have barely got out of the last one. Worse still, the government itself is fuelling this boom with its Help to Buy scheme, which in London is ludicrous.

The solutions

There are three solutions to this problem and only three. They are as follows:
Ratchet up interests rates sharply so that people cannot afford mortgages and therefore stay out of the market; which stops price rising. Hardly satisfactory for those wanting to buy their first home and disastrous for industry which is still recovering from the crisis. This won’t happen, for if we were the only country to do it then GBP would rise sharply, making our exports far too expensive for other countries to buy.

A mortgage famine. This is on the way. Basically, the Bank of England is making it increasingly difficult for banks to lend money to house buyers, so if you haven’t got your mortgage, start looking now. In six months’ time it is going to be very difficult indeed unless you have a large deposit and earn shed loads of cash. This appears to be the government’s preferred option and, in my view, is totally unsatisfactory.

The final answer is quite simple. Build more homes. Every 16-year-old that did a GCSE in economics knows that price is a function of supply and demand. Too much demand, not enough supply, the price goes up.

The 16-year-olds may have the answer but George Osborn and Ed Balls haven’t. London is probably the most expensive, and therefore the most valuable, city in the world. Building more homes and selling them will not only slow the house price spike, but will also provide desperately needed homes and make the government lots of desperately needed money.

So what's the problem?

Why don’t they do it? It’s because of the NIMBYs (not in my back yard). Every time someone wants to build anything in this country, everyone objects. I live in Highgate, North London where there is a full scale local industry in stopping things being built, whether it’s new houses, basements or even a garden shed.  

The absurd argument is that there is not the land to build on. Nonsense! Less than 13% of the UK is urbanised and only around 1% is actually concreted over. London is the greenest large city in the world and it is not densely populated compared to other large cities such as Paris or New York. 

Out with the old...

No one is suggesting that we build tower blocks in the Cotswolds or concrete over the South Downs, but the next time you’re driving into or out of London, have a look at the houses along the main roads — the A40, A10, A3 and the North Circular. They are lined with 1930s cottage type houses that are now wholly unsuited to be at the side of a 6-lane trunk road. If you really want to be depressed turn off and have a look at the run down estates that sit behind them.

This land should be purchased by the government, which should then give itself planning permission and build decent apartment blocks thereby increasing the capacity 10-fold or more. Not all the green belt is beautiful rolling hills or prime farm land. Some of it is almost waste land which needs to be used and the NIMBYs need to be told to shut up and stop being so selfish. Young people need homes, the country’s economy needs to build more homes and the NIMBYs need to be silenced.

I fear it won’t happen and, in five years’ time when the economy crashes again because of the house price bubble bursting again as it has so often in the past, it will be the
same NIMBYs who are the most vocal in grumbling over how we got into this mess. It will have been their fault and that of the spineless politicians who failed to stand up to them.

Peter Burgess

Friday, 9 May 2014 at 1:19pm

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Comments

Excellent article. We need to scrap the Council Tax and replace with a property tax on owners who have a property bigger than their basic needs. ie 2 Adults = 1 bedroom, 2 Adults + 2 Children = 3 bedrooms. PLUS a ban on ownership in Britain if you do not have a British Passport. These solutions operate in many continents already. Housing is for living.

Posted by Ian Cunliffe at 4:43pm

Rising house prices are crazy, my suggestions are,
The government should freeze all rises on existing stock, why should a pre-war, or Victorian stock rise in price, it only fuel housing inflation.
Strictly control the sole called buy to let market, it has destroyed the first time buyer initiative which is the fuel for the next step.
Build apartments to meet the need of singles and retirement based on a square footage principle, examples of which can be seen in any Ikea store, ie 450 sq ft living modules.
End second home ownership, or at least apply 150% minimum council tax bandings

Posted by Kelvin Harvey at 5:51pm

Good article Peter Burgess and spot on in most areas.
Build more houses but also recognise that not everyone wants to own so build more social housing/council houses to bring some sense back to the rented sector. It's not only Nimbyism that gets us to where we are and where we are headed but also the greed that wants our own house prices to keep on rising as we all pull the ladder up behind us. Government must take some unpopular but sensible decisions here!

Posted by Bob Harper at 6:47pm

The problem lies within London and London alone. Through out the rest of the country there isn't a price boom in housing. I know as I've only lived in London for just over a year.
How a two bedroom flat aka apartment in estate agents eyes can cost up to £340,000 ex council. Is in reality a farce.
As for populating green belt areas there is no need. There are plenty of empty office buildings in central London that could either be demolished or refurbished to create new homes. Alas the government will not do this. Also they need to take action against companies buying land through council offers and then blaming the recession for not building on it. For example the Greenwich Peninsular. The ratio of social and lower paid housing schemes were meant to be 65 to 35%. I.e. 35 % affordable homes. The council backtracked allowing said firms to decrease affordable housing to 5%..alas it will not change as each government only wants to line their pockets.

Posted by Stuart at 11:05pm

I agree that people coming into our country if they have not got a passport should not be allowed to purchase a property.I also don't believe in shared ownership if its for buying yourself a property .For people who want to share a house and all pay towards their share is the only time shared ownership should be used.

Posted by AnnMaskery at 11:15pm

raising interest rate may keep out the consumers out of market which is always devastating, and that create a vicious cycle of downfall. Customer out leads to demand slower leads to supply slower leads to lower production leads to lower investment leads to higher unemployment that leads to downfall of other economics parameters...

Posted by zahid at 4:41am

The Unemployment figures are very misleading. 240,000 people have had their benefits suspended in a three month period. The Gov are counting suspended claims as back to work. Working with the unemployed my experience is that the new tough regime is hurting the wrong people. Benefit Fraudsters who habitually missuse the system just adapt to the tougher criteria. More than half the people being sanctioned either do not have the basic skills to meet the new criteria or are people being caught out on administrative errors, 'missing phone numbers from job search sheets' 'writing the wrong statements on application returns'. As in any organisation personal interpretation and motivation color sanction decisions. DWP advisors are performance managed on the amount of sanctions issued. This policy basically assumes a % of failure irrespective of people's activity. Beware of false accounting by the Gov.

Posted by Stacy Hill at 8:02am

So everything in the UK economy is good again, as good as it was in 2005 - except for the problem of real estate - as it was in 2005. So nothing has changed then, the UK is still building an economy on real estate prices and with playing Monopoly.
Two things not mentioned here - the UK is now home to the highest number of non taxpaying and tax dodging billionaires and the growth in hunger and food banks shows no sign of abating. False reporting and repetition doesn't make it right

Posted by not a real one at 12:27pm

I agree in part. But this Government and others only look at short term building new properties is fine and will stimulate the economy short term. Some areas marked for expansion do not have good infrastructure but no one wants to build any new roads or pipe in anymore services to ease the situation. The more people you cram into one area the more annoyed they get. Put to many rats in a cage and they start to eat each other until there is only one left. It always annoys me when you read the council state this project will create 200 jobs. How? Once the buildings are up there are no jobs to do. Not all the contractors will reside in England so the money they earn is moved out of the country and not spent locally.

Posted by James Brown at 5:33pm

I agree!

Posted by Yana Andrews at 1:40pm

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