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The Conservative party in the UK are supposedly the party of free markets and yet, when it comes to housing, they seem comfortable declaring that they (the government) will build X thousand new homes per year. What is their justification for even contemplating such a blatantly non-free market policy? What would they say if asked, "Why doesn't the private sector build the houses without any government interference?".

EDIT: As an example, in the Conservative Party Manifesto of 2015, there was a promise to: "build 200,000 new Starter Homes – 20 per cent below the market price, for first-time buyers under 40"

  • I think it's partly tied up with land zoning. Green/brownfield development. Most countries are the same. In effect the government has a monopoly on planning restrictions which gives them enormous power over the housing markets. See Hong Kong for an extreme example of this. Leads to much corruption. – makelemonade Oct 6 at 8:30
  • @makelemonaide: In that case, instead of saying "we're going to build X houses" they would be saying "we're going to give planning permission on X sites, and let the private sector build there". – Mick Oct 6 at 8:41
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    Yeah. Governments like to pretend they do everything, but of course in reality most are pretty hopeless. I'm sure Boris will be out in a field with a spade for a photo op. – makelemonade Oct 6 at 8:43
  • Almost all houses are built by private companies. I don't know much about the UK, but the governments usually auction the land to big developers. – makelemonade Oct 6 at 8:45
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The government doesn't build houses itself, it just provides the market conditions for private developers to build more houses themselves. Their justification is that the housing market is 'broken', and requires government interference to become healthy again. In 2017, Sajid Javid, then Secretary of State for Communities and Local Government, presented a report detailing this argument, as well as setting out the steps that would be taken by government to 'fix' this market.

The key arguments presented in the report are

  1. Not enough local authorities planning for home building in their area,
  2. The pace of development being too slow,
  3. The structure of the housing market, being made up of a 'handful of very big companies', presents a large barrier to entry for smaller developers & new companies.

In order to fix this, the report proposes that the government creates a new standard methodology for local authority home building planning, reduce red tape in the planning system to increase the pace of development, and diversify the housing market by supporting housing associations and smaller developers.

More recently, in the Homes England strategic plan for 2018-23, this is presented in more detail. In particular, the introduction by the Chief Executive explicitly states:

We will use our land, money, powers and influence to increase the pace, scale and quality of delivery. This will accelerate the delivery of new homes in areas of greatest demand and help to create great places.

That doesn’t mean we will build the homes ourselves. It means we will intervene in the right places at the right time to change the market, by working with ambitious partners and being more intelligence-led in our decision-making.

Meanwhile, the Chairman makes it clear that in order to achieve the Government's target of 300,000 new homes, the housing market needs to be 'disrupted'.

Conservative MPs also seem to argue that the housing market is not a free market in the first place, and a balance needs to be sought between Government intervention and the market - Nick Boles, then a Conservative MP, presented this argument in 2018:

The roots of this problem lie in a fundamental misunderstanding of the nature of our housing market and house building industry. We talk of them as if it were a free market and all the problems that emanate from it are a result of free market operation, but that is not the case. This is a market in which the Government have made the most extraordinary intervention. Back in the 1930s, the house building market used to generate, in a country with a much smaller population, well over 300,000 homes every year. That was a free market, ​but the problem was that it led to unstoppable urban sprawl, as cities reached out into the countryside in a never-ending way.

As a result, as a Parliament and as a people we decided to introduce the Town and Country Planning Act 1932 to constrain that sprawl and introduce some order into the development process. That was an extraordinary intervention. We went from a situation in which someone could buy a plot of land, put up a few homes and sell them, to a situation in which the right to develop land was nationalised. The landowner has no innate right to build anything on their land. They have to apply to the Government for permission. That is an intervention that I support. I believe that the British people were entirely within their rights—as my hon. Friend the Member for Tewkesbury (Mr Robertson) is entirely within his rights—to want to defend the precious English countryside, but we need to acknowledge the effect of that intervention and be willing to embrace the measures to ensure that we nevertheless build enough homes for our people.

In France, they have a planning system, yet every single year they build 300,000 or 400,000 homes and they have very much less in the way of house-price inflation than we do. In Germany, they have a planning system, and every single year, routinely, they build 300,000 or 400,000 units, and they too have managed to avoid the UK’s curse: house-price inflation.

So to conclude, the Conservative party justifies intervention in the housing market by acknowledging that the market is 'broken', perhaps due to intervention by previous governments. They do not propose to actually build the houses themselves, although they may use this rhetoric, but instead support intervening in the market to reduce red tape in the planning system, as well as supporting smaller businesses through investment and ensuring local authorities continue to plan for the home building they require.

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  • While broadly agreeing with you answer - and the nationalisation of the "right to build", the creation of "green belts" (not the same as "green field" sites), and generally the central planning of house building has lead to the kind of problems it usually brings. That said the number, character and location of new houses does have a real impact on existing residents, and some process - market or otherwise - to reconcile those externalities would need to develop for a free market in house building to work well. – Duke Bouvier Oct 6 at 10:30
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    Planning permission is primarily in the hands of local councils, with Whitehall having an override on appeal. However voters already living in an area are generally against new developments, so in many cases the local council is motivated to slow things down as much as possible. Part of the new system is rules that local councils must follow. – Paul Johnson Oct 6 at 12:19
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    It is not a "free" market in any sense. The government is heavily involved, and despite their crocodile tears, they always will be. The release of new land is a natural monopoly, just like the provision of certain utilities, security, and of course governance itself. This of course goes against the core principles of political parties that claim to want to reduce the size of the state and so they release reports like you mention which will do next to nothing to change the current situation. – makelemonade Oct 6 at 13:40
  • It still sounds rather anti-free-market. – user253751 Oct 6 at 16:23
  • @user253751 not everything can be free market... or indeed should. – Moo Oct 7 at 0:41

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