[...] I hope to expose the lie that the housing crisis is a market question of supply and demand. Governments of all stripes have argued that we simply need to loosen plannning restructions and build more homes for sale. It may seem logial enough to argue that if we increase housing supply then prices will come down and there will be more homes to go around, but the UK housing market doesn't function like a pure market: it is linked to global capital flows, not local circumstances. These global flows are distorting the market and ensuring supply is being skewed towards investors.

The free market answer to the malfunctioning planning system is simply to remove it, loosening regulations as much as is politically possible to make it easier for developers to build more, smaller homes and therefore bring prices down. This is ridiculously simplistic. It's derided even by right-wing thinkers: a report from the Conservative think tank the Bow Group rejects the conventional wisdom of the property lobby that planning deregulation and government subsidies for lenders and buyers will solve the affordability crisis. Report writer Daniel Valentine writes: 'The solution is not extra supply. Extra supply feeds house price inflation, by reassuring investors that house price inflation will continue. The property lobby says that price is a function of supply and that increasing supply will eventually prices. The opposite is actually the case.' Conversely, he points out that when supply fell following the financial crisis, prices fell as well. Investment markets operate differently from user markets, with investors attracted to the rising prices which exclude users. [...]

[...] More than 40 per cent of the entire housing benefit bill goes straight into the pockets of private landlords. The money is not reinvested in housing, although this booming market is driven by demand from councils who desperately need the properties because they don't have enough social housing. The result is that nearly every local authority operates private sector leasing schemes, leasing back former council properties from private landlords--at huge expense.

One of the consequences of the exodus from London is that the same pattern of property specuation and displacement is spreading to other cities such as Bristol, Hastings and Margate. And while population shifts to other towns might seem to some like a good way of rebelancing the economy, the problem is that the majority of jobs remain in London; nearly every FTSE 100 company is headquartered in the capital. With a weak private sector in the regions and existing public sector jobs shrinking rapidly as a result of cuts to public services, it is not possible to contemplate real solutions to the housing crisis without profound structural economic change. [...]

[...] Top of the list is a need for a development land tax to recoup rising land values and keep markets under control, championed by luminaries from Adam Smith and Lloyd George to Churchill. [...]