Building luxury homes for millionaires is good for poor people
Yes In My Back Yard!
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A couple of years ago I was radicalised.
It wasn’t that ISIS managed to persuade me that blowing stuff up was a wise idea, nor was I seduced by the allure of becoming a right-wing controversialist.
But I became a die-hard YIMBY supporter.
YIMBY stands for “Yes In My Back Yard”, and is a movement that campaigns to build more houses. It has been growing over the last few years, particular in places where housing crises are at their most acute, like California, New York, and basically all of Britain.
It’s an important cause because housing is a critical factor in some of Britain’s most vexing problems. Housing is expensive, which makes the cost of living crisis worse. If housing is hard to obtain, it hits our productivity as people are less able to move to take advantage of economic opportunities. If we don’t build more houses, immigration becomes a zero-sum game and makes people more hostile to foreigners. And because housing is scarce and expensive, it is a significant factor in, unsurprisingly, homelessness.
The political demand is pretty simple: Britain needs more homes for people to live in. And it needs to make them cheaper.
This might sound obvious, but until a few years ago I hadn’t really considered it a particularly pressing issue. But what finally persuaded me was, well, I bought a house.
By this, I of course mean that together with my partner (in our mid-thirties and early-forties), we actually bought 5% of a house and borrowed an ungodly sum of money from a bank that we’ll be paying back for most of the rest of our lives.
The actual logistics of buying the house were pretty straightforward, judging by everyone else’s horror stories. We bought a new-build using the government’s Help to Buy scheme, so all we had to do was fill in some forms, make around five million phone calls to solicitors to get different documents signed1, and a few months later we were the proud owners of a three bedroom home just outside of London.
It was a genuinely thrilling moment. After a decade of renting together, we suddenly had a modicum of financial security. We could finally paint the walls of the place we live – and more importantly, smash holes into them to run ethernet cables2. Truly, we are now living the dream.
But what horrifies me is reflecting on how incredibly lucky we are to be in this position.
Neither of us are from particularly wealthy backgrounds, but we are both childless, white-collar professionals with a household income well above the median3, and we are of course a couple so can take advantage of all of the economies of scale that implies4. So we were essentially playing the game of “millennials buying a house” on easy mode5.
It’s frankly horrifying to imagine what this is like for literally almost anyone else. If you have kids, have a lower income, or are unable to work from home and need to remain tied to a specific expensive location, the notion of home ownership must seem comically absurd6.
The true scale of the problem can be seen in the numbers. Depending on whether you prefer the estimates of the government or campaigners, Britain needs somewhere between 300,000 and 340,000 new homes every year to keep pace with existing demand. And you’ll be unsurprised to learn that these targets are not being met (in 2020/21, the number of new homes was just 216,0007).
So it’s pretty obvious that we need - to borrow an old catchphrase from Jonn Elledge - to build more bloody houses. But this isn’t as straightforward as it sounds because the entire planning system is geared against building things, and the politics of housing are somehow even worse.
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NIMBY vs YIMBY
Something strange happens the moment you pick up your keys after buying a house: In an instant, all of your material incentives in life change.
Before you owned a home, more houses being constructed was good for you as a prospective buyer. But after, more houses means that your home won’t increase in value quite so quickly.
And even if you tell yourself you’re not buying a house for abstract financial speculation reasons because you’re a good person and not an evil capitalist, your new circumstances push you towards a strong status quo bias. Because as behavioural economics teaches us, humans fear loss much more than we appreciate gains, which makes us risk averse and afraid of change. And once you own a house, you have a stake in everything remaining the same, because to a certain extent, you’ve already won.
“Sure, more homes nearby could provide more places for people to live, create jobs, and attract investment in the area,” home owners might tell themselves, “But on the other hand, it could bring crime, scary foreigners, or (worst of all) slightly increase traffic. Is it really worth taking the risk of building anything new?”
Obviously I’m exaggerating for comic effect, but also I’m not really. You don’t have to dig too deeply into planning consultations and press coverage of new developments to see how the structure of the planning system and local government indulge these destructive tendencies.
For example – and to be clear I have about a billion examples I can choose from – here in Kent there is a proposal to build 158 flats on Rochester High Street. The scheme would include one and two bedroom flats, shops, a connection to a river walk and even an amphitheatre for hosting arts events. Sounds great to me – an opportunity to revive a tired part of the town and provide homes for 158 more families only a short walk from a railway station and other amenities.
But as Kent Online reports, a conservation group made up of local residents, the City of Rochester Society, strongly opposes the proposals. The proposed flats are “dull, outdated and not in-keeping with its historic surroundings”.
Now I know what you’re thinking – “historic surroundings”! I too love history, and spend my holidays wandering around cathedrals and taking selfies in front of blue plaques. So what history is to be found in the immediate environs of the proposed development?
A car dealership, an “adult shop”, and boarded up buildings. Don’t believe me? I actually went out of my way to go there and see such a historic location for myself8.
This is far from the only example I could point to in just North Kent. Down the road in Margate, local residents are opposing building ten flats where there is currently a Dreamland bed shop, and a van hire. And in Gravesend, locals and councillors are opposing plans to turn a long derelict cinema into a nine-storey block containing 53 new flats for people to live in9.
I’m sure you could pick apart some of these examples, or level valid criticisms at them. Perhaps the proposed design of the Rochester flats isn’t particularly inspired, or perhaps building in Gravesend might require trees to be chopped down. But the problem is that the current planning system suffers from a terminal case of perfection is the enemy of the good.
As things stand, there are so many veto points in the current planning system that the net effect is that it makes actually building stuff really hard, because NIMBY (“Not in my backyard”) local residents are able to wield each sensible-sounding check and balance to maintain the status quo.
If you read enough reporting on planning decisions, you’ll start to spot all of the tics, such as complaints that a proposed development will increase traffic or reduce parking spaces10.
There is one particular veto point that annoys me most of all. I consider myself someone who cares a lot about the environment – but I’ve seen “environmental” concerns wielded so often in planning stories that my gut reaction is (perhaps unfairly) to view it as an immediate red-flag that someone is insincerely bullshitting to try and gum up the works in the planning process.
And these sorts of environmental reviews, though they sound uncontroversial in the abstract can have really stupid consequences for development.
For example, in the early 2000s the Treasury announced that Ebbsfleet in North Kent would be transformed into a major new “Garden City”. It’s a great place to build, as it is on the outskirts of London, has a station on the HighSpeed 1 railway line, and it could prove a huge economic shot in the arm for a relatively deprived local area. And best of all, it has the potential to provide 15,000 new homes for people to live in.
To a certain extent though, the success of the whole development hinges on the development of “Ebbsfleet Central”, a new central business district built around the immediate environs of the new railway station. The plan is to build some nice, dense, flats for spatially and environmentally efficient, city-style living. (I wrote a feature on the development for Engineering & Technology magazine if you’d like to read more.)
But now following an environmental petition, in 2021 half the site11 was designated an area of Special Scientific Interest, because of some “rare spiders”, and the plans have been partially scuppered because of it12. So sorry millennials, no houses for you13.
Supply and demand
This brings me back to my enjoyably controversial headline that made you click to read this.
For all of the obfuscating, the housing crisis boils down to the simple reality of supply and demand. There are not enough homes to meet demand – so prices continue to rise faster than wages14, making everyone miserable in the process.
Unfortunately, over the years the government has responded to this reality largely by intervening on the demand side, which ultimately makes the problem worse15.
Even the mechanism that my partner and I used to buy our house - Help to Buy - while useful for us on a personal level, makes it worse for the country at large. Essentially we’ve been handed a second enormous loan to help us pay for our mortgage deposit. So the British state helped us juice demand for the same limited supply of housing, keeping prices high for everyone else.
There is a political logic to the scheme. We’re in the demographic who might traditionally be expected to vote Tory once we own a house, so if the government can buy off the votes of enough people like us, they can hope to win future elections without having to fundamentally reform the planning system or take any political risks.
But aside from the fact this trick doesn’t appear to work with millennials, it isn’t exactly a sustainable solution to the housing crisis in the long run because it doesn't fix the underlying problem16.
The only way to really, ultimately fix it is by building more houses. And once you recognise this, there are downstream implications for our political opinions.
For example, one obvious concern is the type of houses that do get built. A common complaint is that the proportion of “affordable” housing in a proposed development is too low, relative to the proposed “market rate” housing. Why should we consent to just building homes for millionaires?
But this doesn’t get at the heart of the problem. The entire reason we have specially designed “affordable housing”, and that councils have to provide subsidised “social housing” is because housing is too expensive, and the way to to reduce the price of housing is to build more.
And even if we were to imagine a fantasy Britain where housing was abundant, the Postcode Address File had an open API, and ska-punk was back in fashion, an increased housing supply would be better for poor people as it would make it cheaper for local councils to acquire or build property to use as social housing – meaning they can provide housing for even more people in need. Or they could even use the saved tax-payers money to mitigate another problem in the selection box of crises that the government has failed to address, like social care.
So as counter-intuitive as it may seem, because the housing supply is relatively fungible17, more market-rate housing – even luxury flats for millionaires – is just as good as more ‘affordable’ or ‘social’ housing. Because all three increase the housing supply and increase the number of places there are for people to live. Because that’s how supply and demand works.
Home is where the vote is
To be fair to people who oppose building some things, some of the time, there are trade-offs when it comes to planning. The built environment is a zero-sum game, so building stuff does necessarily require either building on previously undeveloped land, or replacing buildings that already exist.
And the councillors, planners and politicians all have to weigh competing priorities against each other. Maybe the spiders in Ebbsfleet really are that valuable to our natural environment?
But I think what is clear is that the Sim City-style slider between “preservation” and “building stuff” is currently pushed too far towards the former, and if we are to have a country that is prosperous and not just a decaying museum that no one can afford to live in, we need to move it several more notches towards the latter.
If we build nothing, Britain risks becoming frozen in time like the Chernobyl exclusion zone – albeit without any nuclear power, because nobody wants to build that either.
Deep down, everyone already knows that we need to do this. Both of the major political parties are nominally committed to reforming the planning system18, but because of how politics ties political careers to the incumbent residents of different local areas, doing anything about it requires taking a risk and spending some political capital.
I’m not smart enough to know exactly what policy interventions would accelerate house building the quickest. But I do know that if we can scale up the number of new homes being built, the upside could be transformative.
If housing was cheaper, not only would more people be able to own their own home, but rent and mortgage payments as a proportion of income would fall. We’d all have more money to spend and invest in parts of the economy where we can make productivity gains.
We’d be able to pay for more training or education, or buy more things that would enable us to live more comfortably. The left would be happy19, as money saved would disproportionately help the poor (because it is hard to think of a more basic need than ‘shelter’), and the right would be happy as it would make the economy slightly less sclerotic. Even the slightly mad birth-rate worriers would be happy, as people would have more money to start families.
Since we moved into our house (in a bright blue, Brexity constituency, just to scare any Tory MPs reading), I’ve developed a new hobby. Whenever there is a planning consultation for new housing, a new cycle lane, or a solar farm, I respond by enthusiastically backing the proposal. After all, I’m a home owner now - I’m materially secure enough to have the time and resources to do it.
Given how few people tend to respond to these things, I’ve already started to see my comments quoted in summaries of the feedback that councillors receive. So far this is the extent of my radical, one-man20 YIMBY activism, but I’m hoping that it is helping nudge things in the right direction21.
So I’ll end this by urging you to do the same. If you want more places for people to live, it is time to head over to your local council’s planning portal and start clicking. Everyone already knows that we need more houses – that much is inarguable – and maybe if we care about it a little more, politicians will finally find the courage to do the same.
Phew! You made it to the end - it was a long one this time! If you enjoyed this post please consider subscribing (for free!) to get more takes direct to your inbox. And be sure to follow me on Twitter (@Psythor), to receive micro-takes. And please do share it with your networks! Spread the YIMBY word!
When you receive an email me saying “Hi, just wanted to check in on where we’re at with this,” what I actually mean is “Hurry the fuck up”.
If you’ve never sat at your desk in your home office and had a speed test report back a speed of 900Mbps down, can you really say you’ve even lived?
My partner tells me she finds it very romantic when I explain our relationship in terms of economies of scale.
There’s also an alternative nightmare history where we failed to save enough money for a deposit before the economic chaos of this year kicked in, hiking our rent, forcing us to dip into savings to pay it, and then having the Truss-Kwarteng crisis screw up the housing market even more, leaving us unable to buy a house and struggling to pay the absurd rent we were paying before.
To put this even further into perspective, though we are relatively privileged for the reasons stated above, we were still priced out of London, and there was no way we could ever have dreamed of affording to buy anywhere roughly equivalent to the two bedroom flat we used to rent in East London. And yet we’re the lucky ones!
Even pre-pandemic in 2019/20, according to those same figures, new home completions were at only 243,000.
And people say that Substack is just bloviators mouthing off. Look, I did some actual shoe-leather journalism for two minutes before going to a nearby pub.
If you dig into the planning documents, you’ll find concerns about the “historic roofline”, even though the proposed building is just down the road from a historic Tesco Metro, across the road from a historic (and closed down) Pizza GoGo, and of course about three minutes walk from the train.
For bonus points include a photo of (middle class) home owners holding placards in protest, usually wielding their kids as a rhetorical weapon too, even though six year olds aren’t usually best placed to hold informed opinions on the trade-offs inherent in planning applications.
(Which includes a former cement works.)
An interesting subplot of this is that when Liz Truss (remember her?) announced plans for “Investment Zones”, Ebbsfleet Development Corporation immediately expressed an interest, because if you read between the lines, it might allow them to override the SSSI more easily.
It also killed plans for a significant new theme park, which I desperately want to feel ambivalent and cynical about, but which I secretly think would have been pretty cool.
There’s a good chance that if you own a home, your house ‘earned’ more money than you last year.
This footnote is to acknowledge the person who inevitably tweets me saying “What about reducing immigration?”, and me rolling my eyes, given the net economic positives of immigration, and pointing out that cutting immigration to reduce housing demand would be like shooting yourself in the foot after stubbing your toe.
It’s particularly doomed to failure with me, as I’m the sort of high-information weirdo who has deeply entrenched political views (as do you if you’ve read this far). But even for millennials who aren’t internet poisoned Twitter addicts, I suspect the fact that nobody can get a doctor’s appointment after a generation of wage stagnation makes the party a hard sell for my generation.
Literally the one singular upshot of NFTs is that they have taught us what “fungible” means. And I’m sure any economists reading can tell me why housing isn’t really fungible, but you know what I mean - If you have more houses, there are more places to live.
The LibDems, of course, have seemingly never seen a planning application they wouldn’t oppose.
Something I find strange as YIMBYism has risen in profile is the critique from the left. As far as I can tell, it’s more an aesthetic criticism than a policy disagreement, as YIMBY-aligned people tend to be centrist-y speccy policy nerds playing an inside-game of influencing political elites, instead of trying to build a fabled mass-movement of people who hold rallies and sing folk songs.
If there is anyone else in Kent who wants to start a YIMBY campaign, there will be at least two of us here.
Do feel free to tweet this piece back at me when I’m in my 50s and the forces of material interest have fully captured me. “Yes we need more homes, but not just here,” I’ll cry as I imagine with horror how a new block of flats might cast a shadow over my local golf course.
As someone who works in national infrastructure, the perversion of environmental regulations to serve NIMBY interests is something that keeps me up at night. The laws are often not fit for purpose. To take the most extreme example I have encountered, one project that I have been involved with ended up being forced by the legal case of a wealthy and well-connected local landowner to cough up £9m to provide environmental mitigation for 22 stone curlews, or £400k per bird. Since the state will never spend that much to subsidise an individual's housing, I can only deduce that we humans are less important than birds under our legal code, which is a disturbing conclusion indeed.
Great post, making such an important point in a way that I haven’t seen made so clearly before.
I also think there’s a fix that needs to happen all the way up at the central banking level. Right now the Bank of England readily collateralises “mortgage backed securities” but not, e.g. loans to property developers or local councils for building projects. This means that it’s low risk for a bank to lend into the *demand* side for housing but high risk to lend into the *supply* side. As a result, loans for mortgages grow faster than the housing stock, driving the inflation more. A simple adjustment to the BoE’s collateral framework could change all this, I think.