Brits pack ’em in like sardines

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By Leith van Onselen

Those who have followed this blog for a while will know that I am highly sceptical of the UK housing system, which I believe operates world’s worst practice when it comes to social and economic outcomes.

Central to the UK’s housing malaise is its dysfunctional supply system, which has become increasingly constipated following sixty years of urban consolidation policies and strict planning. When combined with decades of easy credit and policies aimed at stoking demand, UK housing has displayed high levels of price volatility, as well as extreme unaffordability (see next chart).

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The forced urban consolidation caused by the UK planning system – whereby only 8% of the UK is urbanised, compared with roughly 28% in Germany, 20% in Italy, 28% in the Netherlands, 18% in Switzerland, and 9% in Spain – has also caused Britons to live in some of the worst and most cramped housing conditions in Europe. As shown by the below table, which comes from the London School of Economics, new homes in the UK are, without exception, the smallest in Western Europe:

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And yet despite the size of UK homes shrinking, they remain amongst the most expensive in Europe, caused primarily by decades of strangulating urban land supply and escalating land costs.

Overnight, the UK Telegraph published an article revealing the shrinking size of UK apartments as developers attempt to provide ‘affordable’ housing options in the face of escalating land costs:

Developers faced with sky-high land prices are cramming a lounge, kitchen, bedroom, and bathroom into just 46 square metres.

That is the same size as a Jubilee Line tube carriage, according to the Royal Institute of British Architects (RIBA)…

A room needs natural light from just one window measuring a tiny 45cm x 45cm, or the size of an average cushion.

As a result, thousands of people are now living in a “cramped, dark, artificially lit environment”, the RIBA says.

The average British home is getting smaller, having shrunk from 85 square metres to 76 square metres, and from 5.2 rooms to 4.8 rooms.

It means Britons now have the smallest homes in Western Europe…

A third of home owners, 32 per cent, say they would like more space, and 20 per cent would like more natural light.

In fact, for those living in a home that is two to ten years old, a lack of space is their main reason for wanting to move out.

Three quarters – 75 per cent – consider a lack of space a “key problem”, and 69 per cent say they do not even have enough room for their possessions.

The RIBA report, The Case for Space, says: “Space is an important factor when people are choosing a home, but many feel that newly built homes aren’t big enough.

“Research suggests consumers are right to be worried.

“A lack of space has been shown to impact on the basic lifestyle needs that many people take for granted, such as having enough space to store possessions or even to entertain friends.

“In more extreme cases, lack of adequate space for a household has also been shown to have significant impacts on health, educational attainment and family relationships.”

Kevin McCloud, presenter of Channel 4 show Grand Designs said the creation of green belt land had increased land prices and in turn resulted in smaller homes.

He said: “The Town and Country Planning Act effectively rationed the distribution of land for development by producing the green belt.

“That meant land started to be traded as a commodity and increased in value.

“We have enormous quantities of green belt and one of the best preserved countrysides in Europe.

“But the price we pay for that ‘green and pleasant land’ is very small homes.

“As the value of property has gone up, we have had to get used to buying smaller places.

“Ultimately, the person who suffers is the homeowner.”

Urban planners that deride “urban sprawl” in favour of “compact and efficient cities” often pay too little attention to the deleterious costs imposed on citizens forced to live in cramped and expensive conditions. The UK, which has operated urban containment policies longer than anywhere else, highlights the many flaws in their approach.

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Unconventional Economist

Comments

  1. And this morning we get “the Auckland Council has voted not to delay the … Unitary Plan.”

    – The Unitary Plan will be the rulebook that shapes the way Auckland grows. It will determine:
    (1)what can be built and where
    (2)how to create a higher quality and more compact Auckland
    (3)how to provide for rural activities
    (4)how to maintain the marine environment.

    So our beaches must be better than yours…..

  2. Do you suppose that the UK immigration policies of the previous few decades may play some part in this?

    • A very restrictive planning policy is a lot less of a problem when the population is falling than when it is rising like it is in the UK.

      Britain is a basket case from what I can see, it manufactures very little, especially when compared to its import of manufactured goods. Does not produce enough food to feed its bloated population and has a lot of debt. It is only a matter of time before it collapses in my opinion.

      • I agree; and read the 1998 report, “Driving Productivity and Growth in the UK Economy” by the McKinsey Institute, to work out why.

        Urban planning destroys a nations manufacturing and tradables sector as well as making housing unaffordable. Aussie is actually following this by the book, just a few decades behind the Poms.

  3. I understand your criticisms, but having lived in both London and Sydney, I’d pick London any day (except for the weather). In London I had great public transport, I could walk to a whole lot more places, and on the weekends I could get out to the country in 40 minutes (To the Chilterns, or Cambridge by car), thanks to the Green Belt. There are lots of advantages to a denser urban area, and I loved the way the Green Belt gave each outskirt city it’s own character. Also, although it’s cheaper to rent in Sydney, it’s cheaper to buy in London . . . . the problem to me is the easy finance – the squeezing up is what makes cities liveable and easy to get out of.

    • Thanks Felix for your comments. Would you consider yourself to be an average person and representative of a typical Londoner?
      I ask because rich inner-city elites often have a distorted view of reality and don’t appreciate the suffering of poorer people.

      • Those damned elites. I’d rather live in a compact city myself. But wouldnt increasing the supply of high density living in Australian city centres concievably take pressure of larger house blocks at the fringe thus improving prospects for families who need them? Not that our governments would be able to manage something like that

        • We should be freeing-up all types of housing and letting consumers choose how they want to live. Those who want to live in the inner city would be free to do so, as would those who prefer a bigger home on the fringe.

          Any concerns about infrastructure costs could be met by adopting Texas’ MUD model, or heaven forbid going back to the old-fashioned bond financing model, which existed in Australia prior to the 1990s. Implementing a broad-based land tax, such that the government providers of infrastructure captured some of the value uplift when infrastructure is built, would also work.

          Another problem with inflated land costs is that they makes all types of development more expensive and also increase infrastructure costs, since land acquisition is typically a large component.

          • I think we have to agree to disagree. IMHO, and independent of offer/demand issues the UK vs Texas comparison as policy guidance is spurious and at best a minor component when compared with the credit all-you-can-eat buffet of the noughties (OK, and in Australia still going on). Using your favourite whipping boy, the UK, it is worthwhile remembering that urban policies there have gone well beyond sprawl containment. In particular height restrictions and heritage conservation (where even Victorian social housing is considered something that must be protected everywhere if a royal fancy´s doing so) has pushed the population on to a flat urban footprint. Whereas in Spain (or even Germany) 4-5 stories is standard in a town this would be Central London in the UK or Manchester, bar recent developments in the last decade. On the other hand I would like to point out that the infrastructure necesary for sprawl has a maintenance cost as well. And Texas ain´t keeping up with it either. I would stick with pulling the cheap credit IV first.

          • Jason, I think we have largely reached a consensus on this site that “supply” of housing determines who is going to miss out on “being housed”; credit determines the price at which people will either buy or miss out, the amount of debt they take on, and the profits of the lending sector.

            We have noted that it is pissing into the wind to expect politicians to tighten credit as a “solution” to a housing affordability problem; they reflexively loosen it, “to help those who are missing out”. Then prices go up more and the same people still miss out and those who do buy, take on more debt.

            Good luck re-educating people and getting it established as a principle that it is acceptable for some people to always be priced out of housing regardless of whether credit is tight or loose.

            You really are incorrigible if you do not see that the “Texas” model – it actually applies to around 150 cities all over the US (Kansas has the most responsive housing supply of the lot) – results in the maximum number of people getting housed – and “loose credit” actually does result in more people buying houses at pretty much uninflated prices – just as happens with cars and TV’s. And existing owners refinancing, boost discretionary income.

            IF infrastructure maintenance actually WAS a bit more expensive, the spare money in society from the low housing cost would be more than enough to cover it several times over. But it actually is NOT more expensive – there is NO evidence to support this argument. In high density cities, the cost of access and disruption and land acquisition is far higher and much necessary upgrading and expansion is perpetually postponed due to unaffordability. The UK’s cities have probably the world’s worst crisis in this area as well as the housing affordability and quality crisis. They tend to go together.

          • Phil, if I have learnt anything is that simple, appealing solutions to complex problems always fall short. Your simple solution of building faster than investors can buy is a waste of capital, be it labour, materials, money (whatever it is worth now), land, resources or words.
            As for “consensus”, this is hardly a scientific debate. There is no proper definitions being used of what each one defines as sprawl or if urban policies are comparable across countries or for that matter within the same country. My point has always been the same, that lose monetary policies are causing market distortions and that they should be tackled rather than causing other distortions. Your preference for building faster than the market can take it is an educated opinion which I respect but disagree with. And yes, I am incorregible. Simplistic arguments require criticism.

            “…“loose credit” actually does result in more people buying houses at pretty much uninflated prices….”

            I find this comment interesting and the root of our disagreement, which I fear eternal.

          • JasonMNan,

            Who said anything about building faster than investors can buy?

            That comment is consistent with the confusion of many who support the current planning system in the misguided belief that doing anything else is some how pro reckless investment and sprawl.

            The current system is a major contributor to the speculation in housing.

            As for sprawl – the best way of avoiding cities with large footprints -if that is what you want – is to restrict population.

            Forcing people to live in apartments and terraces at high cost because that is what you and your friends want to do (and because you dont like sprawl) is outrageous.

            What the anti- sprawl ( read anti-car) obsessives seem to forget is that a lot of people like personal mobility and even if you take away their petrol cars they will sooner drive hybrids or even motobikes then life in what they consider to be chicken coops.

            (written on location in a chicken coop accessed by public transport for most purposes)

          • Jason:

            “….Your simple solution of building faster than investors can buy is a waste of capital, be it labour, materials, money (whatever it is worth now), land, resources or words…..”

            So 1,000 too many houses at $150,000 each is a waste of capital, but all 200,000 houses in a city inflating in price from $150,000 to $450,000 is not a waste of capital?

            In the event that a few too many houses are built AT AFFORDABLE PRICES, a brief lull in construction, a few young people marrying a few months earlier, and a few in-migrants fixes the problem, with perhaps a small fall in prices market-wide.

            The “bulldoze the surplus houses” phenomenon has ONLY ever taken place in a market that was so distorted by government interference that PRICE inflation occurred as well as “overbuilding” in the WRONG places (because none was permitted in the right places).

    • Agree with Felixfrost. I lived for quite a few years in southwest London, in a fairly average area (Morden) – certainly not inner city elite. Fantastic transport links, and easy to get out to greener areas still within the M25.

      You can buy a 4 bedroom terrace house with 2 bathrooms in this area for about AUD 550,000.

      The affordability problem is really because of the much lower wages in the UK (apart from the obvious supply problem).

      • Add council tax which can vary enormously between boroughs and the overall cost of housing is high. But as others have said amenities, transport, density of population offer benefits to a true urbanite; though allow up to 5 hours to get back into London on the M4 on Sunday evening from a weekend away.

      • The problem with London is the sheer size of the place.

        Most suburban commuters (yours truly included) would tend to actively avoid hanging around after work or travelling at weekends to the West End to take advantage of the ‘facilities’.

        It is easy to ‘live the dream’ if you’re residing in St Johns Wood or Chelsea, pleasurable to go out after work, enjoy the bars, clubs, world class theatres and fine dining, knowing that you live 15-20 mins away.

        Far less so when you’re 15-20 mins walk from the nearest Tube close to the end of the line and face a 45 min ride + 15-20 minutes walk the far side to get where you need to go.

        Another side effect of living on the suburban edge in London, is that hopping in a car to go anywhere is very different to Australia.

        A real world first hand example, to go shopping from where we lived in Kent to the nearest mall in Bluewater 40km away was a 45 minute drive at the very minimum, well over an hours drive most days and sometimes 1.5-2 hours behind the wheel.

        A 40km drive to most parts of Melbourne outside of the rush hour is 30-40 minutes tops.

        • Very true which is why many Londoners faced the prospect of going south or north of the river with horror. People stay in their own villages.

          As to the wider issue of moving around the country, the UK is similar to a rat colony in that it has too many people and a transport network that chokes or stops and the rat colony, with its stresses and aggression, and roundabouts, is a close analogy.

          • “UK is similar to a rat colony in that it has too many people and a transport network that chokes or stops and the rat colony”

            This is a common problem with urban consolidation policies. They achieve higher density, but in the process increase congestion and average commute times. They also encourage leapfrog development, which perversely increases sprawl for lower income inhabitants who are pushed further out to where they can afford.

          • Toronto Board of Trade Paper:

            Commute to work times:(ROUND TRIP in minutes)
            Dallas 53.0
            Milan 53.4
            Seattle 55.5
            Boston 55.8
            Los Angeles 56.1
            San Francisco 57.4
            Chicago 61.4
            Berlin 63.2
            Halifax 65.0
            Sydney 66.0
            Madrid 66.1
            Calgary 67.0
            Vancouver 67.0
            New York 68.1
            Stockholm 70.0
            London 74.0
            Montreal 76.0
            Toronto 80.0

            http://bot.com/Content/NavigationMen…2010_FINAL.pdf

          • I left off Barcelona 48.4 minutes because it has about 25% unemployment, which is a kind of unfair “advantage”.

          • Your point is correct, the unemployment rate in Barcelona is 25% now, but was “only” 17% during some of 2010 – and was rising through the year.

            My point is still valid that this is somewhat of an “advantage” when it comes to traffic congestion.

    • +1 Bluebird

      Nigel Farage is a man with true courage in his convictions, a world appart from the career pollies we get who clearly live as parasites pandering to the demands of big money.

      The fact that groups that threaten our government with advertising campaigns get instant capitulation and we the people scream for change and get dismissed is an outrage.

      We should have an advertising campaign of our own, if MSM won’t back us then blitz the web.

      • Yes, he’s even survived a crash in a small plane and his speeches in the Euro parliament are very entertaining. A hard man indeed by the looks of things.

      • I really like Farage too, but I doubt that his party will touch the urban planning sacred cow. This is one thing that I have found that even the best people in the UK on most political issues, simply lose their reason over. Support for “preserving the green and pleasant land” and the belief that it will be “paved over” if they reform the planning system, is nearly wall-to-wall across the entire political spectrum.

  4. Just to clarify, I lived in Hackney in London and I live in Bondi here, so actually I’m much more upmarket here than in London. I just hate suburbs, and public space (Clissold Park, Hackney Downs, Victoria Park, Hackney Marshes – or beautiful Bondi beach) more than make up for loss of private space in my book.

    Big houses and urban sprawl is alienating and anti-community.

    • Living in Hackney (20 mins from the West End) and Bondi…

      Sounds like the lifestyle of a member of the inner city elite to me. Hackney is a very fashionable address for the bright young hipster.

      The average punter could not afford to buy a house and raise a family in either location.

    • On the subject of the social cohesion of cities relating to density, there are two papers by Glen Bramley and Sinead Power (and other co-authors) on “Social Sustainability and Urban Form”; and one by Glaeser and Gottlieb on “Urban Density and Civic Engagement”, that do not find any correlation in favour of higher density. The Glaeser and Gottlieb paper comprehensively debunks Robert Putnam’s famous “Bowling Alone” paper, but that has not stopped advocates of higher density referencing it constantly.

      Robert Fishman, in “Megalopolis Unbound” argues (correctly in my opinion) that modern social networks are “a la carte” and based around the motor vehicle and communications. Out of every household, there will be members networking with other sports players, with other musicians, with other fishermen, with fellow professionals, with workmates, with church members, with chess players, with schoolmates, with other parents of same-age children, with debating societies, with Kiwanis-type organisations, with political party members, etc etc etc. The “a la carte” urbanism of automobile dependent society is far richer than its critics looking on from afar can discern.

      High urban density is marked just as much by inter-neighbour conflict as by positive interaction. Well separated private properties enable every household to pursue its own interests without giving its neighbours cause for objection. Patrick Troy has some choice comments about all this in his book “The Perils of Urban Consolidation”.

      • Out of several hundred people I know LIVING in London maybe 20% had cars, and of all of those people absolutely none of them used them inside London – everyone used public transport, with the car being used almost solely for journeys outside London, which always result in us SWEARING to never use the car again because its far, far better to use the train.

        So, there’s that.

      • Just a reminder that Google books has that Patrick Troy book – a very good read.

        Speaking as someone who likes living in medium density and who would not like to live in suburbia ( I grew up there) my experience has been that the majority of the people I grew up with would not consider for a moment living in the medium density ( flats and terraces) parts of Sydney.

        To the extent that some have it has usually been conditional on being able to afford at great expense a suburban style house in some heritage zone.

        As for all those supposed car-less inner urbanites – i recommend a visit to Balmain in sydney where the cars are absolutely choked with cars even though the population is approx 50% of what it was in the 1920s. Those who don’t have cars often are not doing so by choice and given the chance many would love to have one – for convenience – if they had somewhere to park it.

        A lot of people like having space and denying them that choice simply because a small group have ideological preferences about cars and public transport and can afford and enjoy living in chicken coops is both patronising and anti- democratic.

        By all means oppose migration and population growth but if you fail ( or actual support migration and population growth in an act of supreme cognitive dissonance) don’t try strap and squeeze the population we have into your personal urban whale bone corset.

    • Fabian AlderseyMEMBER

      “Big houses and urban sprawl is alienating and anti-community.”

      Fine – so let those who are community minded live in high density communities, and let those who want space live in alienating suburbs.

      I think most of us would agree that we wouldn’t want “someone on high” telling us all how to live, which god to follow, and so on.

  5. I never thought I’d see this insight coming from a MSM spokesperson:

    “….Kevin McCloud, presenter of Channel 4 show Grand Designs said the creation of green belt land had increased land prices and in turn resulted in smaller homes.

    He said: “The Town and Country Planning Act effectively rationed the distribution of land for development by producing the green belt.

    “That meant land started to be TRADED AS A COMMODITY and increased in value…..”

    (My emphasis).

    Peter Hall et al pointed this out in their 1973 report, “The Containment of Urban England”.

    Mainstream economics just assumes that markets allocate land to its best use. But Hall et al pointed out that the land rationing system in the UK since 1947 had resulted in “land” becoming a typical speculative commodity market and nothing to do with actual incomes produced on it or amenity value.

    • Kevin McCloud regularly made mild digs at the planning system throughout the grand designs series.

      If his views have recently firmed it may because of his experiences in trying to build affordable but well designed social housing. That project would have forced him to confront the damage caused to low income earners by the current system of town planning.

      A far cry from the often well educated and cashed up folk building their fantasies where the lunancies of town planning were just a jolly challenge that made great viewing.

      Watch the series about that project ‘Kevin’s Grand Design” with an appreciation of the costs of the planning system on real people and you are watching a different show.

      • mild digs?

        One of my fave shows btw – and I am always aghast at the planning hoops that they have to go through. And then the NIMBYism of the neighbours as well..

        I actually get quite angry listening to how it takes “2 years to do this, 6 weeks to change this minor design change approved, 4 months to get this approved” or how they have to spend wasteful amounts of money making new builds looking exactly like 100 or even 50 year old dog shitboxes – “so as, not to break the character or charm”…BS

        Watch Grand Designs Abroad, and Kevin makes a dig at the French/Italian/Spanish planners/builders/work ethic – but then says, well at least its not as bad at home…

        • Yes – perhaps mild wasn’t the right word.

          I meant mild compared to the quote that Phil reported. I don’t recall him saying anything that direct about the consequences of the planning system in general.

          Perhaps a better way of putting it is that while he railed against the inconvenience and pain in the butt stupidity of the regs he did not directly comment on how the regs were a key reason many of the grand designs could only be executed at great expense and personal trauma and stress.

          But then it is possible if there was no regs making the process of building an exercise in water torture – there would be no ‘Grand Designs’ show either.

          Not much of show in the following:

          Cynthia and Dave had a life long dream to create a glass pyramid in an out suburban suburb using recycled glass from a demolished office building. They spoke to an architect and a building who said they could do the work. The house was built within time and on budget.

          Grand Designs would fit into that 10 minute slot before the ABC news – currently occupied by that cute cartoon about ants.

  6. It Really depends on what metric you are looking at – since the UK is 4 separate countries – this is completely misleading and designed to prove an ideology rather than simply present facts.

    Areas like Scotland and Wales and even Northern Ireland have some of the cheapest housing in Europe, and vast tracts of wilderness – especially Scotland.

    So the UK has 257 people per square kilometre which means they have an 11% higher population density than Germany which goes a long way to explaining the differences in housing areas.

    However, as I mentioned the UK is several countries in a Union with very, very different make ups, housing values, sizes, and densities.

    So when we look at England VS Germany which is much fairer comparison as England has 85% of the population of the UK (53 million out of 62 million in total) we see that the population density SKY ROCKETS to 406 people per square kilometre.

    Wow, now that really is a very, very different scenario isn’t it.

    I don’t have the land area usage for England specifically – it appears it has been left out for some reason, anyway, 85% of the population being in England, while Scotland and Wales being – well – empty, there is absolutely no doubt that the urban land area would be a very, very different story from that being presented.

    So the reality is that England has 44% MORE people per square kilometre than Germany which means on a people per square kilometre basis England is far, far, far better than Germany.

    This kind of reminds me of the Excel Spread Sheet error by Reinhart-Rogoff, but that’s what happens when you try and force the data to meet your ideology.

    http://gizmodo.com/5994887/thank-a-simple-excel-glitch-for-austerity-economics

    Even so, on the data presented as misleading as it is, the NON UK areas mentioned are vastly more densely populated, have vastly more strict planning and stringent zoning laws than Australia and are VASTLY cheaper – so – its not the restriction which is driving up their prices, because, well, they’re much stricter and much cheaper ???!

    • Go take a look at the latest Demographia Housing Affordability Survey and then come back and tell me that Scotland and Wales have “cheap housing”. Even better, go back to the 2007 Demographia Survey (i.e. prior to the GFC bust) and tell me whether housing in these places were “cheap”. I think you will be unpleasantly surprised, particularly given the shocking state of the houisng stock (old and cramped) and the crappy economies contained within.

      Moreover, the urbanisation rates are as follows: Great Britain: 6%; England & Wales: 8%; Scotland: 2%. These are way less than Germany (28%) where planning is relatively responsive and home prices have been relatively stable and affordable.

      • It LOOKS cheap. In fact whole cities look cheap, nasty and dilapidated.

        But urban growth containment planning produces, much of the time, “Detroit without the ameliorating factors of low urban density and housing affordability”.

    • leaving to one side UE’s questioning of your data, what exactly is your point?

      It sounds that you are trying to argue that town planning has little to do with the cost of land or housing and thus imposing lots of restrictions to produce your vision of the ideal urban landscape (and the lifestyles of those live there – no cars, lots of PT, lots of Gigabyte fibre links) involves no additional cost.

      Even if you were able to prove it – SO WHAT?

      Are you really so obsessed as to deny people the right to choose where and how they live?

      People are still allowed to buy cars and are extremely likely to continue to have access to some form of cheap personal mobility if cars become too expensive ( or banned by people like you) so it is extremely likely that people will continue to have the means to access suburban home sites in sprawling suburbs – they may use motorbikes with shopping delivered in vans.

      So even if you win the war against the car – big deal – personal mobility is what you are waging war on and that is a war that you will lose as personal mobility is here to stay.

      Using restrictive town planning (limiting sprawl) as some kind of weapon in an ideological war on cars is bonkers and cruel considering who it hurts the most – those least able to afford it.