I am currently on a research trip studying local government and housing affordability in different jurisdictions around the world. This week, I have been in and around London conducting interviews and meetings.

For decades, the United Kingdom has faced the same basic issue of rising house prices as New Zealand. Despite a correction over the past few years of the global financial crisis, British houses remain among the most expensive in the world and out of reach for many ordinary British families.
 
One of the reasons for the long British housing boom was how it was reported: The media here have presented high house prices as a good thing; homeowners have borrowed against the increase value; and everyone has felt wealthier.

The United Kingdom faces the same basic issue of rising house prices as New Zealand. For years the media here have reported on high house prices as a good thing; homeowners have borrowed against the increase value; and everyone has felt wealthier (with the notable exception of some modest and localised corrections caused by the global financial crisis).

However, no one called this phenomenon in the United Kingdom’s housing market by its real name: inflation, which was caused by demand being unable to respond to supply. This lack of supply has been a problem since the 1950s, but was exacerbated in the past 20 years with the United Kingdom further integration into the European union, rising population, and the vast availability of cheap credit up until the global financial crisis.

Britain has also been served poorly by its planning system, particularly the intersection between planning and local authorities. The local government system is a hopeless mess. Those who raise the taxes don’t spend them, and cash goes to local authorities through all manner of bureacratised silos. Around three-quarters of most council revenue comes from Whitehall grants, amid a plethora of targets, micromanagement, and conflicting policy agendas.

Despite the frustrations we all feel at times with our local councils, anyone advocating further centralising of government, or relocating functions or revenue streams from local councils to the Beehive, should look at Britain as a cautionary tale. Britain has the most centralised government in the developed world, but its anaemic growth (a triple dip recession) and dire fiscal situation suggests centralisation has not worked for quite some time.

Housing has been deeply affected by the British commitment to central planning and poorly aligned incentives. Some councils are pro-growth, but most want to keep people out, as they argue that the cost of each additional dwelling vastly outstrips any benefit the community may receive.

There is much to chew over, but the United Kingdom probably can teach us more about what to avoid in planning and land use rather than useful policies to adopt.