How the housing crisis has created a generation of socialists

How the housing crisis has created a generation of socialists, by Kristian Niemietz.

I took part in a panel discussion on the UK housing market, organised by a London university, for an audience of students and young academics. …

The left-wing speakers all basically said:

“You, young people, are getting a rough deal. You pay through the nose to live in a mouldy shoebox. Clearly – clearly! – the free market has failed you. Neoliberal dogma has failed you. But I’m sure Kristian here will tell you that everything is fine, because the free market always works perfectly.” …

Nope, it’s not the free market to blame for the housing crisis, but socialism. Government has interfered with housing, and it’s interfered with money. A house purchase exchanges money for a house, and both parts of the equation have been made increasingly non-free by government intervention over the last century. Naturally that government intervention has created winners and losers — and it’s not hard to figure out which classes of people are which: just look at who has the most money and the nicest houses.

Britain’s land use planning system is one of the most restrictive ones in the world, and there are dozens of empirical studies which show that the severity of land use planning constraints is the most important long-run determinant of housing costs …

I pointed to a recent study on the English housing market, which estimated that excessive planning constraints account for more than one third of the average house price. I talked about the entrenched resistance to new development from vocal NIMBY groups, and politicians’ unwillingness to confront them. I compared our housing market to a system in which the government makes it almost impossible to grow or import hops: if, as a consequence, beer prices explode, and beers become flabby – would it make sense to claim that “the free market” has failed?

I normally find it hard to judge whether a presentation goes down well with an audience or not. In this case, it was clear that it did not. I failed to get through to that audience. What I said made no sense to them.

Most of them probably really did pay through the nose to live in a mouldy shoebox. To them, the line that their problems were the result of runaway free-market capitalism seemed intuitively persuasive. And, crucially, that perception fed through into a more generalised hostility to free market ideas.

This is not too surprising. Most of us do not form our opinions on economic matters by studying textbook models, but by extrapolating from our own experiences as participants in economic life. Most of those experiences are positive. It would be hard to whip up an anti-capitalist frenzy by telling people how they are being exploited by greedy profiteers selling them iPhones, coffee, shoes, laptops, pizzas, glasses, medicines etc. …

This is not an original insight. In the 1950s, a West German politician observed that across Western Europe, the share of votes going to communist parties is inversely related to the number of houses built. By keeping a tight lid on house-building, successive governments have, more or less, managed to keep the NIMBYs quiet. But they have created a socialist monster in the process.

hat-tip Matthew