Tim Worstall outlines why just increasing the number of building permits allowed won’t — by itself — increase the total number of houses built. This is because the process of awarding the permits has been largely captured by the biggest players, and the supply is artificially restricted by local governments:
Kensington High Street at the intersection with Kensington Church Street. Kensington, London, England.
Photo by Ghouston via Wikimedia Commons.
The first bit is to diagnose the problem properly. If the big builders won’t build because they don’t want to then and therefore we want to find other builders who will and do want to. And the important part of this is that the big builders do indeed have market power. It costs a lot — a lorra lots — of money to be able to get a scheme through planning. Thus we not only have that problem of a shortage of places to build — because planning — but we’ve also handed market power to those able to build — because planning.
The answer is to shoot the planners, obviously. But then that always is the correct answer. Here, more specifically, we need to flood the zone with permissions. Really, grossly, oversupply. Like issue 15 million permits. Say. At which point the value of a permit is zero. So, anyone with a scrap of land can gain a permit and build.
This brings back the small housebuilder. Instead of being held back by the ideals of half a dozen national builders we’ve got 50,000 blokes all looking to build 2 or 3 houses a year. Or 10 or 20 even.
There’s no way that the big builders can then delay building on their plots. For they don’t have market power any more. And even if they do want to delay then it doesn’t matter a damn.
And this always is the way that you deal with those with market power. You flood that zone with supply so as to destroy their market power.
