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  • Andrew O'Brien

The NIMBYs are the true Thatcherites, but they are losing the battle of ideas

The World Cup could not have come at a better time for the Prime Minister, with football pushing the open warfare on planning and housing right down the news agenda. The fact that it has centred around a “technical” amendment to the development of housing targets is also a godsend. Tories arguing over targets? Zzzzzzzz.

Targets matter. The UK has a severe housing shortage. If there was no national target for local areas to aim for, housing approvals in many parts of the country would grind to a halt.

This blog is not about housing or property development, we aim to look deeper at the issues.

This civil war has not suddenly emerged this week. As many commentators have noted, it is not simply “wets” versus “Thatcherites”. Those on the right, centre and left of the party have come together.

Ideologically, this is the consequence of forty years of blind faith in the market, an unwillingness to regulate and an underappreciation of public investment. It is a microcosm of the Conservative Party failing to adapt its economic philosophy based on what is really going on in the country at large and how business works for far too long.

Essentially, the problems started with the significant reduction in social housing construction. The vision was that the public sector would step back from the construction of new homes and the private sector would step up. This has simply not happened. The average number of homes built by the private sector since 1979 has been 127,000 a year. This is less than the average in the decade before 1979, where the private sector built 145,000 a year. Local authorities have gone from regularly building over 100,000 homes a year in the decade up to 1979 to a few thousand a year since.

Why? Well, as Carol Lewis points out in The Sunday Times today, this is because developers are not interested in building more houses for the sake of it, they are interested in their profit margins. Constrained supply, spiral housing valuations, these are not incentives to accelerate house building, they are an incentive to keep steady as she goes.

Again, this comes back to an ideological misunderstanding of the nature of business and capitalism. Yes, businesses need to serve their customers to make a profit. However, they need to serve them up to the point that enables them to generate maximum profit with the lowest possible risk, nothing more. Businesses are sensitive to the “supply-demand” curve and once they have found the equilibrium that enables maximum profitability with lowest possible risk, they are not going to push further. Moreover, they can shape that curve through their own actions, giving them further market power.

Unfortunately, Conservatives have assumed that private businesses are going to be better at meeting the need of consumers because they want to make money. However, once you are making good profits at low risk, where is the incentive to go beyond that? This is the big gap in the Conservative’s economic thinking. The housing market is not a “broken” market, it is what a functioning market looks like in the real world, not in a textbook or in a lecture hall. And housing is just one example, there are many others like it across the country.

Similarly, public opposition has come from the quality of housing and available infrastructure. According to a survey by MFS, 60% of people believe that there are too many poorly-built, unattractive new-builds. The same survey found that 81% of people were unenthused about living in a new build. I have actually lived in a new-build, it was the first flat I bought when I moved out of my parents home. It was functional, but like many new builds it lacked character, had low ceilings and did not feel “homely”. It was at least energy efficient. Why have we got so many properties of this kind? Well, because property developers have perfected a model of building that suits their needs and is just about tolerable for the consumer. What is the incentive to change without external pressure? There is none. Again, any consideration of business and markets would have demonstrated the likelihood of this outcome decades ago, but there was a belief that if people wanted Georgian or Victorian style housing, the market would respond to that demand. It has not. Conservative aesthetics will never be delivered through relying on markets to meet demand.

At the same time as pushing for more housing, the past decade has seen the Conservatives preside over a significant real terms reduction in expenditure on public services (only now being increased). The same advocates for housebuilding have often been those championing the needs to reduce the size of the state and push hard against public investment. Unsurprisingly, people will not support housing development if there is not enough infrastructure to support it. The Conservatives’ binary of private good, public bad, has obscured the interdependency between the two. High levels of private investment depend on high levels of public investment.

Ironically, it is the NIMBYs that are staying true to free-market dogma and the YIMBYs (led by the free-market think tanks) that are undermining their own ideological position. The NIMBYs believe that getting rid of targets will force the market to meet the need of consumers to build housing because without targets, they’ll have to meet the needs of consumers. YIMBYs believe that without the targets, consumers will not give enough ground to the needs of developers, who will only build where it is profitable to do so. It is the NIMBYs believe in the naïve Thatcherite vision of business, whose primary role is to serve the consumer. It is the YIMBYs that understand that business serves shareholders, so the state must intervene on the side of capital. The YIMBYs that are pushing a more corporatist position but at least it is realistic, based on historical precedent. The problem is that even if their vision was carried forward, business in its current form will never build enough homes.

If the free market think tanks are turning their back on the party’s ideological position for the past forty years, this tells you how the “battle for ideas” is going. Yet it is still hard for the party to let go. A seismic defeat in the next election may lead to a change in economic vision, or it may see the party retreat to its comfort zone, for the country’s sake we can only hope for the former.

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