Polly Toynbee really doesn't understand how markets work

We’re told that the only solution to Britain’s housing woes is more social housing. Because, as Polly Toynbee tells us:

The market will never build enough homes, and certainly not enough “affordable” homes, as scarcity drives up prices. Rather than treating housing as something for the market to rectify, the state should start building more social housing. It already owns land aplenty, and doing this would be a double win: it would both help to solve the housing crisis and deflate house prices by introducing more social rent properties on to the market.

It’s entirely true that scarcity drives up prices. But that’s the very thing, higher prices gained for producing a greater supply, which calls forth the new supply which then lowers prices again. The only time this doesn’t happen is when there’s a monopoly supplier. Only a monopolist can, that is, prevent the new supply which brings prices back down again.

We do not have a monopoly housebuilder. Therefore the market, unadorned, would be entirely capable of producing more houses to take advantage of these higher prices. As it did in the 1930s, back the last time we actually had something approaching a free market in house building.

For the problem is that we do have a monopolist in the marketplace, the state. Which decides, and decides alone, who may build what where. If we see results that are akin to those of a monopoly - supply not rising as price does - then we should really be ascribing that result to the monopoly we see within the system.

Free the market from those planning restrictions and watch housing become more affordable. As Polly does manage to grasp with social housing - more housing would reduce the price of housing. So, all we need to do is remove the monopolistic restrictions upon the housing market and we’re done.

That is, as we’ve pointed out before, abolish the Town and Country Planning Act 1947 and successors. We didn’t have this problem before that Act, we have done since, it is the Act itself causing the problem. The solution to housing is actually to have a free market in its provision.