We measured this through (a) average house prices compared to build costs, (b) homelessness, (c) rental affordability, and (d) social housing waiting lists. The economic and social impacts of the housing crisis should guide where we build new towns. When new towns are built in areas where the average house price is much higher than the cost of building the house, there is more surplus value created that can be spent on infrastructure upgrades or on social housing. If the Government wants to maximise the amount of infrastructure and social housing that can be paid for by the new towns, they will need to build in areas with high house prices. Likewise new towns should be built where they will do the most to alleviate the human costs of the housing crisis. With over 300,000 families waiting on social housing waiting lists across London, there’s a moral need to consider building new towns within easy reach of the capital.
Why creating new towns in areas of high demand gives you more ‘bang for your buck'
- High rents and house prices lock young workers out of the most productive work. In many cases, workers moving to a higher-paying job in a shortage city end up worse off after housing costs are accounted for.¹ As a result, some workers do not accept jobs that would see them earning (and paying tax) more.
- New towns are most likely to succeed, both economically in their own right and in alleviating housing pressures, when they are well-connected to existing cities with high unmet demand.
- Local shortages can have significant knock-on spillover effects. For example, London’s high rents price some workers out of the capital and into commuting from Brighton. In turn, this bids up rent in Brighton and pushes some workers out to cheaper nearby towns like Worthing or Lancing.
- There are similar stories across the UK where shortages in high-wage cities reduce affordability across their wider region.
- New homes that are in, or connected to via fast public transport, shortage areas can therefore have much greater and more widespread benefits in terms of employment and affordability than the average new home.
- Planning gain, land values surging in response to planning permission being granted, will be highest in areas of high demand. This, in turn, generates additional funds to invest in infrastructure and affordable homes, including at social rents. For example, a hectare of undeveloped land in the South East can gain £3.6m in value when planning permission is granted, a 100 times increase over its initial value.
- In some areas of Britain, by contrast, major developments can only proceed with grant funding due to low land values.
1Stansbury, Anna, Turner, Dan, and Balls, Ed. "Tackling the UK’s regional economic inequality: Binding constraints and avenues for policy intervention." Contemporary Social Science 18.3-4 (2023): 318-356.