The London Green Belt Racket

Paul Miner, Senior planning officer for the Campaign to Protect Rural England took exception to The Economist’s liberal view that it might be time to open up London’s Green Belt to housing development, at least in part to improve housing affordability. We had commended The Economist for allowing a view that average households in the London area deserved decent housing for a price not skewed upward by the planning created land use oligopoly.

Kate Barker, former member of the Monetary Policy Committee of the Bank of England produced two seminal reports documenting the extent to which housing prices are unnecessarily elevated by the planning regime in the United Kingdom. The Demographia International Housing Affordability Survey (which I co-author with Hugh Paveletich of Performance Urban Planning in Christchurch) annually shows housing to be severely unaffordable from Kent to Liverpool (yes, you read right, Liverpool).

I was pleased when my friend Fidelis (not my friend’s real name) penned a letter in response to The Economist, which was not published. This is not surprising, because demand for letter space in The Economist exceeds the supply by nearly as much as the demand for decent housing exceeds the supply of affordable stock in the United Kingdom.

Fidelis also sent me a copy, which is published below:

“The Green Belt Racket”

Dear Economist:

Paul Miner may well argue for the utility value of “Green Belts”. The basic question that needs to be asked about these, is whether greater benefit at much lower cost would be provided by Green enclaves that remain off-limits to development within a region otherwise open to development. The imposition of a Green Belt, including in Mr Miner’s examples of Seoul and Toronto, has always been followed by relentless declines in housing affordability. The same applies to an urban growth boundary.

The crucial factor in housing affordability everywhere, is the freedom to convert rural land to urban. This does not require the abandonment of a “green and pleasant land” to developers; as long as there is a broader “freedom to convert land”, any amount of land may be placed in “preservation” enclaves without inflating urban land rents in the way that a continuous boundary or belt does. And a multitude of “enclaves” are likely to be accessible to a greater number of people, and command lower “premiums” of price for adjacent properties, making proximity to them affordable to a greater proportion of the population.

Paul Cheshire and Edwin S. Mills, in their Introduction to the 1999 “Handbook of Urban Economics, Volume 3”, mention an estimate that the most expensive land (usually CBD land) in the most expensive growth-contained cities is 100,000 times more expensive than equivalent land in typical non-growth-constrained cities. It is not the advocates of “freedom to develop” who have a case to answer regarding whose pocket they are in, it is the advocates of constraint. The profits made by developers of Greenfield land under true conditions of “competitive land supply” (as in many US cities) are modest and honest. The capital gains made by “big property” through urban growth controls are massive and completely unearned.

Paul Miner argues, as many of his type do, that there is “enough brownfields land” available in London and the surrounds, for 400,000 new homes. But what is the asking price for these brownfields sites? Ironically, Shlomo Angel et al find in “Making Room for  Planet Full of Cities” (2010), that the rate of “infill” of “fragmented” land is higher in low-land-cost, unplanned Houston, than in growth-constrained, high-land-cost Portland. Empty buildings, unrenewed old structures, undeveloped brownfields sites, and speculative properties without tenants due to holdout price expectations on the part of the “greater sucker” current owner – all running along with a severe overhang of massive numbers of “excluded” potential buyers and renters – are all features of supply-distorted property markets such as the UK’s and China’s.

Sincerely,

Fidelis

 

 

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