A little bit of news for Mr. Pennycook
We have what might be called a testable proposition here:
When it comes to housing affordability, we really must get away from the over-simplistic notion that ramping up the supply of new housing will fully resolve the affordability crisis affecting many parts of the country.
Harvard University recently had a report out:
Rental markets are rapidly cooling after a period of significant overheating. Rent growth has almost completely stopped, following historically high rent increases in both 2021 and 2022. In the third quarter of 2023, rent growth plummeted for professionally managed apartments to just 0.4 percent, down from 15.3 percent in early 2022, according to RealPage (Figure 1). While rents slowly rose across property classes, the pace of growth was under 1 percent in the third quarter of 2023 for lower- and higher-quality apartments alike.
This abrupt deceleration was geographically widespread, with rents even falling in some markets. In the third quarter of 2023, rents for professionally managed apartments dropped year over year in 32 percent of the 150 markets tracked by RealPage, including many in the West. Just 1 percent of markets posted rent growth of at least 10 percent in the third quarter of 2023, a sharp turnaround from the previous year when rents in half of the markets increased at that rate. While the slowdown is a welcome change for renters, asking rents still remain well above pre-pandemic levels. Some of the deceleration may be explained by the large number of new units that have come online and pushed up vacancy rates. After hitting a pandemic low of 5.6 percent in late 2021, the rental vacancy rate was 6.6 percent in the third quarter of 2023, according to the Housing Vacancy Survey. The rise in vacancies has been even more pronounced in the professionally managed apartment sector. In the third quarter of 2023, 5.5 percent of these units were vacant, above pre-pandemic averages and more than double the all-time low of 2.5 percent set in early 2022. Vacancy rates in this sector rose fastest in the South, reaching 6.3 percent in the first quarter of 2022.
Now that might be over-simplistic, being merely an example of supply and demand (such Econ 101 is just so trite these days) but it seems to work. Build more housing and the price of housing falls. It’s obviously true that some housing is a Veblen Good - we can’t explain Mayfair without that. But housing in general, yes, Econ 101, simplicity, supply and demand, that works.
Build more housing, enough so that the vacancy rate rises, and housing becomes cheaper. Therefore our plan is to do what? Quite, build more housing. Or even, get out of the way so as to allow the people who actually build housing to get on with building more housing.
This appears not to be what some are proposing:
When making a planning decision relating to development arising from an application for planning permission, the making of a development order granting planning permission or an approval pursuant to a development order granting planning permission, a relevant planning authority (as defined in section 85 (interpretation of chapter 1)) must have special regard to the mitigation of, and adaptation to, climate change.
No, that really is from Hansard, something some are seriously trying to put into law. That whether 23B Burnside Drive can be accompanied by the new infill of 23C Burnside Drive must be tested against the climate change impacts. Which, of course, gives every Nimby in the country the opportunity to shriek that a household should remain homeless because Flipper broiling in the fumes of the last ice floe.
This is, to put it mildly, not getting out of the way so that houses can be built and thereby housing be made cheaper. Even if the observation is over-simplistic.
The actual truth about that Econ 101 is that it does work except for the exceptions. Housing, in the general sense, isn’t an exception.