Cause Area: UK Housing Policy
I allocated just under £30k of my 2021 giving to improving UK housing policy and plan to give more in 2022.
TL;DR of my case for this:
It seems plausible that better housing policy could boost the UK’s GDP by more than a fifth, with all the attendant benefits of extra economic growth.
The current government has some interest in doing this, but needs more pressure to do it and good policy ideas for how to do it.
There are a couple of organisations I think are doing particularly good work in this area in that they’re focusing on what I think the key problem is (housing supply) and have good ideas for how to solve the problem.
I think that a few tens of thousands of pounds could make a big difference here
We should have a high bar for funding interventions to help people in rich countries in the short to medium term. Being wealthy, their citizens can afford much higher rates of consumption and their governments can spend at much higher rates, so many of their strongest needs are met. Giving money directly to these relatively wealthy people is not as effective as giving to people who are roughly x100 poorer. Further, there are interventions ~ x10 as good as giving money to these poorer people. This leads to Open Philanthropy arguing that EA interventions in rich countries should seek to meet the x1000 bar.
It is difficult to find causes that meet this standard (though the x100 bar for simple cash transfers is easier to meet and arguably more relevant for the long term).
I think changing housing policy in rich countries is a plausible cause that meets this bar, particularly in areas with the highest costs of housing and highest productivity. Here is a rough cost-effectiveness model that suggests housing policy could meet the bar.
I think that the UK’s housing policy is among the worst of all rich countries, and to date has not received the funding or attention that US housing policy has. Founders Pledge commissioned a great report on this area, focussing on the UK. In contrast, Open Philanthropy has already put several million dollars into funding this cause in the US.
House prices have been rising substantially in many developed countries:
For the headline price of a house, the proximate cause of this is easy access to credit caused by low interest rates. The basic story is that low interest rates allow people to pay higher prices for goods by borrowing more, as the cost of that borrowing is low.
Interest rates are not the full story. We do not see the prices of other goods rising substantially with greater access to credit. Cars for example have not seen the same level of price increase because as prices increase, more cars can be manufactured to meet the level of demand. So interest rates do lead to increases in price, but only if supply of a good is limited. For housing, increasing prices have not led to corresponding increases in supply due to remarkably low price elasticity in many countries. Interest rates also do not account for the variation in the rate of house price growth between regions in the same country.
A better metric for housing costs is simply rent price. Here too we see large increases in real terms (graph UK only):
Again, this is not what we would expect if interest rates were the full story. Lower cost of credit should make it cheaper for landlords to pay their mortgages, which should lower rents.
As we see in the figure above, and as argued most forcefully here, as a percentage of income, rents are decreasing, so in some sense things are getting more affordable. I think this is true but misleading. For one thing, rents can still be too high even if they are gradually shifting in the right direction. Most importantly, the quality/quantity of housing has not significantly improved during this period (in fact space per person is falling in much of England). So people are paying more money in absolute terms for the same or worse housing. Generally this is a sign that something has gone wrong with a market, and usually that thing is that supply is limited in some way.
Some argue that housing will always be scarce due to limited supply of land for housing in the most in-demand locations. But housing does not equal land. A plot of land can accommodate either a single bungalow or a twenty story block of flats. We can increase the supply of housing in a location massively by building taller buildings at a higher density. We can also allow land to move from lower valued uses (e.g. golf courses) to higher valued ones. This need not result in a hive city—many European cities are denser and more pleasant than typical UK cities. For example Paris has a population density of 21,000 people/km2 compared to London’s 5,666 people/km2.
Demand is so high in particular locations because of the economics of agglomeration, whereby productivity is higher and the cost of amenities lower in densely populated areas. Broadly speaking, this is why people want to move to cities: their salaries and quality of life are higher.
In theory, building more housing in a location could simply result in more people moving into that location, and not lower housing costs. Even if this were true, more housing would be a good thing. Firstly, more people could move to the area and get a higher salary and quality of life. Adding more people also adds to the agglomeration effect of the region, improving its productivity and the amenities it can sustain. So we should not completely focus on falling housing costs, though most models indicate costs falling in any case.
The fundamental issue is that the supply of housing is not increasing by enough to meet demand. The reason for this is primarily restrictive rules on what can be built where. This is easiest to see in the difference between an empty plot of land without planning permission to build and the same plot with planning permission, where near London the difference can be more than x100 (page 26). We can also look at the cost of a given house versus the cost to build it—using this method you find that roughly £3.7 trillion of the £5.5 trillion total value of UK housing is costs over and above what it would cost to build.
Other explanations have tended to focus on distributional concerns, such as the share of housing that is publicly owned, the proportion of housing for rent vs owner occupied and the number of foreign investors in a market. I think these are basically all red herrings for producing what we actually want (more economic growth) and supply is the main game in town.
In my view, the main value of work on this problem is increased GDP growth by allowing more people to move to the most productive areas of the country, and allowing the most productive people in those areas to specialise more. Lower housing costs would have many other positive effects, but economic growth should be the main aim of interventions in this area.
A lot of economic growth is on the table if the problem is resolved. Estimates from the US show GDP growth being 36% lower than it should’ve been, had housing been unrestricted. One estimate (page 36) for the UK has GDP per capita rising more than a fifth (by increasing GDP growth by 2% for a decade) if housing supply were more optimal. The most pessimistic estimate has the damage of bad UK housing policy at over £600 billion per year.
So the problem is large and solving it would produce a lot of economic growth. Great. Is it actually solvable though?
In some sense, the problem is easy to solve. The government could adopt a less discretionary planning system (to remove the power of locals to veto development) and switch to a zoning approach similar to the US or many European countries. Zoning restrictions could then be made fairly liberal, similar to the policies in Tokyo.
Alas, easy and comprehensive solutions like the above are politically infeasible. Previous attempts at solutions have largely failed due to the unpopularity of development amongst local residents. Why should this time be any different?
It involves reform at national level, like the state-level reforms by the YIMBY movement in the US, but with the nuance that the proposed UK reform, instead of imposing a blanket upzoning, gives extra freedom for small groups to choose to allow more density. The central idea is to allow households on a street to vote by supermajority to allow more development on that street (within various guidelines, see the paper above).
Why could this reform work when previous attempts have failed?
Policies similar to Street Votes have been implemented at a city level in some countries and succeeded, e.g. Tel Aviv and Seoul. Some local areas in the UK have done vaguely similar policies, which were popular.
The policy is explicitly designed to turn losers from development into winners. Normally if someone on my street gets planning permission it is a) inconvenient and disruptive and b) may slightly lower my property value—so naturally I have every reason to oppose it and nothing to gain from it. This policy benefits me at the same time as my neighbour—our house prices both increase and we can both extend our houses if we so wish. So I have a reason to support development, instead of merely opposing it.
The policy tries to concentrate developments on groups of people who want it, in that small groups of people have to explicitly opt-in to increased development. So blowback is less likely than policies which simply allow more development everywhere. Development would be most concentrated in areas where the profits are highest and willingness to build is greatest.
Of course, the reform may not work either:
Street Votes may prove to be unpopular, which could lead to repeal before any benefit is achieved or the policy never being implemented. It could be unpopular if development was opposed by people beyond a single street, or if the requirement of a supermajority voting in favour was not enough to prevent opposition on a street.
Advocates model the benefits of roughly extra 2m homes being built over 15 years (page 33). If a smaller than expected number of streets have the desire or coordination to vote for development, then the benefits would be lessened.
If no version of Street Votes gets passed (or if it gets quickly repealed) then it’s difficult to see what progress can be made. In theory the movement could try again with a similar policy designed to avoid whatever made it fail, or pivot to trying to get a zoning-style system implemented despite the political problems. I’m not particularly optimistic about either prospect.
There are several organisations which work on housing policy in the UK (Founders Pledge lists them at the end of their report). The two organisations I’ve ended up funding are London YIMBY and PricedOut, both of which are small and have limited budgets. Neither of them are currently tax-deductible, although that may change in the future (and tax deductibility isn’t a must in any case). In my view, many other organisations in this area are not focussed enough on increasing housing supply, and instead focus on distributional concerns or interventions that I don’t find promising.
I plan on mostly filling these organisations short-term funding needs myself, but there is probably scope for mid/long-term funding aimed at building a more powerful political coalition. However this would likely require funding multiple full-time employees which is unfortunately beyond my means.
London YIMBY currently primarily advocates for Street Votes, as well as promoting examples of positive development in London. I gave them £17.3k of funding in 2021.
The Founders Pledge report recommended supporting London YIMBY and reckons they have a funding gap of £50k/year. This year, they were not quite able to absorb this much money but hopefully they will be able to in 2022.
The founder is self-funding and works pretty much full-time for free. Extra money allows for them to “buy” reports from other think tanks and to hire support staff for the founder.
I’ve given them funding for several reports, designed to make the case for Street Votes/general reform from a variety of different perspectives (e.g. business, traditionalist conservative, egalitarianism). I think this is valuable as it increases the number of MPs vocally endorsing the policy, making it more likely to be passed.
The founder has not yet hired support staff, other than very briefly, but I am optimistic about this happening soon and increasing the organisation’s output. I think this will be the main expense going forward.
PricedOut has a broader purpose, generally advocating on behalf of people for whom housing is unaffordable. They tend to spend most of their time advocating for increasing the supply of housing and are relatively agnostic about how this should be done. They spend some time advocating for increased renter protection as well. I gave them £11.1k of funding in 2021.
While PricedOut is on the longlist of organisations considered by Founders Pledge, they ultimately didn’t recommend funding them. Based on a few conversations with PricedOut, I think they are worthwhile. I think it is valuable to have an organisation that advocates primarily for increasing housing supply and is relatively neutral about the means through which that is achieved, in case Street Votes doesn’t pan out.
PricedOut is a volunteer run organisation. At the moment, I am funding them to produce a report on the planning system and how it impacts housing supply. I expect my future grants to be similar. In the future, I think they could accomplish a lot more if they had a full time staff member, as well as money for various other support expenses. This would probably look like £50k+/year but I haven’t approached them for details about this.
My experience of grantmaking
I found researching and funding this cause very fulfilling, much more than my usual donations to EA funds or GiveWell. I list the reasons for this below. None of these reasons are truly altruistic and I didn’t get into this area purely for these reasons, but they are nice side benefits. I think I found this fulfilling because:
I got to speak to interesting people, whereas I would normally just read things
This was a new cause for me, so I enjoyed the novelty
I played an active role in evaluating real projects for organisations to do
The political situation is fluid and exciting
The grantees are small, so they are very grateful to receive money
As the RFMF is relatively low, it feels like I have more of a personal impact—I am a larger fish in a smaller pond than usual.
I also think it helped me to build skills as a grantmaker that may be applicable to other causes.
I would highly recommend that people in a similar situation to me try this kind of grantmaking, if they can spare the time.
Arguments for EAs to be involved in UK housing policy:
Impactful: Massive potential for economic growth from increased productivity. Some general wellbeing increases from people living in larger, nicer houses in areas with more amenities.
Timely: This is a crucial period, the current government is unusually keen on (some) solutions to the housing crisis.
Cheap: The amount of money needed to hugely expand efforts here is not that large relative to other causes. Spending would advocate for regulatory change, not directly solve the problem in itself, hence spending is leveraged.
Meta: Success here can validate certain ideas about how to get political buy in for change, perhaps making other changes more tractable in the future.
Arguments against our involvement:
Maybe supply isn’t the issue: As argued by Ian Mulheirn. However, even Mulheirn agrees that increased housing supply would boost agglomeration benefits, it’s just that he focuses on what would bring down the headline price.
Outside view: While the issue has reasonable scope and neglectedness, the tractability is questionable. Policies in this area have failed a lot before, so we should be generally pessimistic.
Not cost-effective: Or rather, something else is better. The cost-effectiveness calculations that have been made are very rough, and the error bars are such that this might not be worth it compared to e.g. GiveWell top charities.
Could be negative: Advocacy for bad policies here could set back progress. As amateurs, EA funders are perhaps unusually likely to fall prey to this issue.
Politics is the mind-killer: We don’t want EA to become mired in partisan politics. I think advocacy here is relatively neutral and this concern doesn’t really apply.
Growth is bad/not important: I buy the argument that economic growth is really important, and a big positive in all sorts of areas. However, you might think that it increased existential risk or that growth isn’t particularly valuable in countries which are already rich. This criticism may prove too much, in that it cuts against all sorts of EA interventions.
Thank you to Alex Robson, David Nash & Michelle Hutchinson for helpful feedback on a draft of this post. This post was shown to Anya Martin of PricedOut & John Myers of London YIMBY to give them opportunity to comment—they did not request significant changes to their sections. All errors and omissions remain mine.