NIMBYism is rational – we should be aiming to get to YIMBYism (yes, in my back yard)

Much of the UK faces an undersupply of new homes and it is widely agreed that one of the main problems is the difficulty of getting planning permission. According to Ruth Kelly, the Secretary of State for Communities and Local Government, the culprits are NIMBYs, (not in my back yard) opposing new developments. NIMBY is a negative, almost pejorative term. Ruth Kelly declares she wants to expand homebuilding by overcoming NIMBYism but then is accused of being an arch-NIMBY in her own constituency.  It seems NIMBY is one of those irregular verbs beloved of “Yes Minister” – I have a principled opposition to an ill-thought out development; you have unreasonable objections; he is a NIMBY.

Yet in all of this the assumption is that the NIMBY is an irrational roadblock to be overcome. But in fact NIMBYism against new developments is usually very rational, particularly for greenfield sites. For example, if you’ve got a lovely view why would you, or should you, welcome a new estate blocking it?  More generally people moving into an area put pressure on local public services. Parking becomes more difficult, trains and buses more crowded, schools and NHS dentists over-subscribed.  

The newcomers will bring some benefits of course. Retailers may get brisker trade but the increased profits will often go back to the head office. The tax base for the area will also rise but again this will go into a central pot (be it council or Central Government). While large new estates may be part of gentrification of an area that raises prices, they also they can dampen prices as they increase supply in the local area. They often do very little for affordability for first-time buyers (the children of local people) as developers tend to prefer to build high value executive homes to maximise the return from scarce land.

So the positive benefits often go to others or are dispersed widely but the negative effects are felt very locally.  NIMBYism is therefore a rational response and until we recognise that and deal with the legitimate concerns, then attempts to overcome it will struggle against human nature and self-interest.  We need a system which brings benefits directly to those local people suffering negative effects. To give two ideas:

• the Income Tax paid by people moving into a new development could be transferred by Central Government to the local town (not county) council for the first 2 years to pay for new facilities
• there should be a more explicit requirement for developers to support local facilities in a directly visible way. For example a total of £1000 for each bedroom built could be donated to local schools. This would be preferable to a planning gain supplement which disappears into the council coffers.

The key principle should be that benefits are seen locally. Developers would of course recover any costs by raising the price of the remaining properties but the amounts would be relatively small compared to the price of the homes. We need to overcome NIMBYism by giving people an incentive to welcome developments and say ‘yes, in my back yard’.

Shared ownership housing -  ineffective and expensive?

The Government has plans to help 100,000 people who currently cannot afford to buy a property to part-own a home through an expansion of its ‘homebuy’ scheme. Under this scheme buyers can purchase up to 75% of the property and the Government or lenders will buy the remainder. The buyer will pay rent on this portion.

These proposals are expensive and will not solve the problem of affordability. Put simply the scheme will favour the 100,000 buyers chosen by the Government by removing the ability of 100,000 others to buy their own home.

High house prices reflect the reality that there is an under-supply of properties in the UK market, particularly in England. The iron laws of supply and demand mean that prices will remain high, no matter what schemes are introduced for first time buyers, until there is a larger supply of property or fewer buyers. Reducing the cost of borrowing for some first time buyers will simply bring in more buyers for the same number of properties being sold. Therefore prices will rise, reducing affordability for everyone else, in particular the 100,000 at the very bottom of the property ladder.

To explain in more detail: taxpayers' money will support 100,000 buyers who cannot afford to buy. These 100,000 will now be able to buy a home, which is good news for them. But this will simply remove 100,000 homes from the available marketplace of properties to buy.

So what will happen to the other people who would have bought those 100,000 homes? There will not be another 100,000 homes at the same price for them to buy.  So these 100,000 buyers will be excluded from the property market.

The families being excluded will be the lowest paid because they are the ones competing for the type and price of properties bought by those supported by the Government – to put it simply the City trader wanting to buy his fashionable flat in the Docklands is not likely to lose out to a Government-supported buyer. The worst-off will be those just outside the threshold for Government assistance who could only just afford to buy a property.

There is certainly an argument for part-ownership schemes for key public sector workers who cannot afford to buy. The Government is then simply acting as a good employer giving employee benefits to retain staff. But the affordability scheme as it stands will be open to all, not just key workers.

What if the properties bought are currently council or housing association rental properties (bought under a right to buy scheme) instead? At first this seems to avoid this problem but in fact it only delays it. At some point the new part-owner will want to move, using the equity in their home. Again, this is good news for them but unless the total housing stock has increased they will simply push out some other buyer for the same property, who has not been helped by the Government.

In summary, the scheme will do nothing to increase affordability in general and will actually increase house prices. It will not increase homeownership amongst those on low incomes and will impact most heavily on those standing at the bottom of the housing ladder.  Ultimately there is only one way to improve affordability and that is to increase supply of properties.

Paul Adams is a consultant specialising in the UK home-mover and property market, with clients such as Guinness Trust Housing Association and Experian.