Even with the most knowledgeable of housing audiences, eyes tend to glaze over whenever the issue of land is raised. To most it is just a huge expense and a barrier to building more homes. Not many people understand how the land market in the UK operates and how it impacts not only the housing market but also the wider economy. I studied the ‘economics of location’ as part of my degree but I still put this issue in the box marked ‘too difficult’ or ‘might try to understand that one day’.
Fortunately, more housing people are looking at the issue these days and there is some hope that an effective land policy might emerge as a result. Last week I reviewed Duncan Bowie’s new book, which has a lot to say about land and planning for housing, and this week another highly relevant new book is published by Zed Books called ‘Rethinking the economics of land and housing’ (also available on Amazon and Kindle) by Josh Ryan-Collins, Toby Lloyd and Laurie Macfarlane with the New Economics Foundation.
It’s good to know from some of the early reviews that the book is highly accessible given the dryness of the subject (mine hasn’t arrived yet – I decided it wasn’t the sort of thing I’d want to read electronically) but Toby Lloyd has written an excellent taster for the Guardian.
Toby starts by recounting the many housing policies that have failed to meet the promise of solving the housing shortage and traces their failure back to our inability to address the role of land in the economy.
Land is obviously important for housebuilding, but the land problem goes much deeper than our housing shortage. It lies right at the heart of many of the economic problems we face today. Financial instability, mounting inequality, debt overhangs and the puzzle of stagnant productivity are all direct results of our failure to properly account for and manage land in the modern economy.
He traces the history of land ownership and the role it has played in impoverishing people as any additional value that they managed to create from the land was quickly absorbed by rising rents. He looks at the various attempts to justify private land ownership as the driving force transferred from agriculture to housing and notes the importance of partial public ownership in maintaining land supply. He traces the development of boom and bust in housing and the importance of financial deregulation in creating the over-investment in residential property that we suffer from today.
Lloyd argues that land is inherently scarce and its control inherently political: the normal rules of supply and demand are inoperable and the market is inevitably both dysfunctional and volatile. We therefore have ‘to break the positive feedback cycle between the financial system, land values and the wider economy, and to capture more of the unearned windfalls private landowners currently pocket at the expense of society at large.’ That can only come through financial regulation, tax reform and more direct intervention.
Lloyd ends with the famous description by Winston Churchill of land ownership as ‘the mother of all monopolies’. Churchill’s speech – delivered in 1909 – is one of the great reads, hugely ahead of its time and still relevant today.
Churchill (1909) complained of the ‘enrichment which comes to the landlord who happens to own a plot of land on the outskirts or at the centre of one of our great cities, who watches the busy population around him making the city larger, richer, more convenient, more famous every day, and all the while sits still and does nothing.’
‘Enrichment without service’ is still a primary feature of land ownership. More than a century after Churchill’s prescient analysis, the time has come for all of us to get to grips with the issue, and this book will help us do it.