London's Green Belt
Marketa Nosalova reports back from a recent conference on London's Green Belt and the arguments for and against releasing it to ease the Capital's housing crisis.Green is the order of the day. Green food, green transport, green buildings. Even McDonald’s is going green. Anything ‘green’ seems to trigger ardent views from all sides of the spectrum and the Green Belt is no exception. Any discussion of the Green Belt seems to stir up vigorous debate between those who consider it sacred ground and those who see it as an easy solution to London’s soaring house prices. It all simmered to a boil at a recent Building Centre seminar – Can London afford the Green Belt? – where both sides of the argument were passionately argued.Some interesting data was presented. Those who would sooner pave than protect the Green Belt argue that it is not as precious and rare as we are meant to believe. Some 22% of land within London’s boundaries is designated as Green Belt and 42% of that is within 2 km of a train station. That’s a lot of land. More importantly, that is a lot of ‘undevelopable’ land in areas of high housing demand. This constraint on supply drives up land value and, in turn, house prices. There is an elegant and inescapable logic to it. The counter argument is all about limiting urban sprawl, prioritising the development of brownfield sites, and encouraging higher density, walkable cities.To be clear, I’m generally agnostic on all of the environmental parts of the debate. Sure, I love my green spaces, but speaking as someone who has – at some point – considered living in a canal boat or a yurt to avoid paying extortionate London rents, if I thought that building on the green belt would lead to more affordable housing, I’d be leading the parade. But the whole premise is built on shaky economic foundations. It is the weird, through-the-looking-glass world of house builder economics, where a whole generation of analyst seems to have been seduced by that one Lex Luthor line from the first Superman movie: “Buy land. They’re not making any more of it.” What we are meant to believe is that land is such a scarce commodity that its value can only increase as its supply diminishes. And the higher the cost of land, the higher the cost of houses. The only way to ease the pressure on London house prices, so the argument goes, is to release more Green Belt land for development. This is, however, a simplified view. In particular, it makes two false assumptions: (1) that the supply of land is completely ‘price inelastic’ (i.e. that any increase in supply leads to a sharp fall in price); and (2) that this is a predominantly supply-side issue.First of all, Lex Luthor only told us half the story. It’s true, nobody is making any more land, so in the very short term, the supply of land genuinely is inelastic and any increase in supply leads to a relatively large reduction in price. But nobody is getting rid of any land either. In the long term, the supply of land is more elastic and in the very long term it almost completely elastic. We can build and re-build on the same piece of land as often as we want. If we couldn't, then you’d have to wonder where all of the temples and aqueducts went. The higher the price elasticity of supply, the less impact you get from eroding the green belt. So the brownfield argument has an elegant logic of its own: why should we sacrifice green belt land for marginal long term benefit, while we still have so many underused, blighted and derelict brownfield sites in London that are crying out for redevelopment?This invariably leads to the second issue about demand. If housebuilding economics doesn’t generate the margins needed to build better homes on brownfield sites in Barking or Brent, then releasing more Green Belt land in Surrey won’t make much difference. It is not the limited supply of land that is driving up house prices; it is the limited supply of places that people actually want to live. The demand for housing in London is not just unevenly distributed – it is overwhelmingly concentrated in those areas that are well-managed, well-connected and well-served by leisure, entertainment, retail and cultural amenities. So instead of chipping away at whatever Green Belt we have left, isn’t our time, energy and funding better spent on creating better places across London?