Surprise: GMA restrictions drive housing prices higher
Wendell Cox, who spoke at our transportation lunch in May, has a great post about how the Green Belt around London drives home prices higher. The Green Belt restricts the supply of land available for development around the city core and is very similar to the restrictions found in our state’s Growth Management Act (GMA).
The Economist reminds readers of the economics of housing (or for that matter, oil or any other good or service): constraining the supply of a good or service in demand raises its price. In a 14-page feature on London, The Economist decries the high cost of housing in London. And, for good reason, the 8th Annual Demographia International Housing Affordability Survey showed London to have a median multiple (median house price divided by median household income) 6.9 in the fourth quarter of 2011. This figure, which would be more like 3.0 in a normally functioning market, is exceeded by few other major metropolitan areas, though Hong Kong, Vancouver, Sydney are more unaffordable.
The Economist noted that:
... perhaps the biggest constraint on development in London is the Green Belt. Established after the war, it runs (with perforations) all around London, to a depth of up to 50 miles, and bans almost all building on half a million hectares of land around the city.
Not only has this constraint led to higher house prices, but it has resulted in greater urban expansion and imposed greater costs, in time and money on commuters.
... it has pushed it into the greater south-east, thus spoiling the countryside across a bigger area. It has also raised the cost of housing and forced workers to travel farther. Commuting costs in London are now higher than in any other rich-world capital.
One alternative is to relax the Green Belt controls. The Economist points out that allowing development one mile into the Green belt would add one-sixth to the developable area of London. The Economist also notes that "far more than would be needed to make a huge difference to housing availability" and that opening the Green Belt "might not be an environmental disaster."
The Economist calculates that "the average London worker can buy half an average home." Britain would gain if the interests of those with a stake in a poorer middle class and greater poverty were to finally give way to the general welfare.
In May, Wendell spoke at our annual transportation lunch and explained the high costs of so called "smart growth" policies. You can watch his presentation here: 2012 Transportation Lunch: The Cost of Smart Growth in Transportation Planning