InvestmentsSep 25 2014

UK’s planning laws ‘key driver’ in house prices: IEA

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The UK’s planning laws and development restrictions have been a key driver of exorbitant house prices, according to a new report by the Institute of Economic Affairs.

During the party conference season a new report from the IEA has been published showing that by eliminating government interventions in areas such as housing, energy and childcare, the cost of living could be dramatically slashed.

House prices relative to median incomes are lower in Washington DC than Swansea, whilst residential space per household in the UK is the lowest in Western Europe.

Not only is UK housing more expensive than in most other countries, the report states we get much less of it.

The report calls for relaxing green belt restrictions, giving more freedom to local authorities to experiment with development compensation schemes, and decentralising the UK’s tax system to encourage development could see prices fall by as much as 40 per cent.

With a more sensible planning system, rent levels for a typical family could fall by over £250 per month, the report claims, equivalent to a pay increase for someone in the 20 per cent tax band of over £4,500 per year.

Mark Littlewood, director general of the Institute of Economic Affairs, said: “For too long, the political debate has obsessed over tweaks to certain benefits or increases in minimum wage rates, at the expense of a host of policy areas where supply-side reform could have a much larger impact on living standards, especially for the poorest.

“The startling figures in this report reveal just how hard life is for many families. If the government wants to tackle poverty it must address living costs.”