Planning Reform Bigger than Immigration in Tackling Housing Crisis

One senior Tory MP even told me he thinks high immigration is the key culprit for Britain’s economic stagnation since the financial crisis. With Nigel Farage and Reform UK circling to their right and Labour’s planning reforms bound to face a fierce backlash, the temptation for Conservatives to parrot the Reform MP Rupert Lowe’s line — “We don’t have a housing crisis, we have an immigration crisis” —will be hard to resist.

Not least because there’s a grain of truth to it. Since 2020 Britain has seen extraordinarily high immigration. War in Ukraine and pent-up study-related migration contributed, as did the post-Brexit rule changes Starmer complains about. The Office for National Statistics estimates that net immigration added 2.5 million people in four years — almost the population of Birmingham.

Such a population boom would stretch any housing market, so it’s no surprise to see stories of queues for viewings and frenzied rental bidding wars in many cities, as the housing expert Ben Southwood has documented. Rents in London, for example, have increased by 11.6 per cent in the 12 months to November 2024.

Yet pinning Britain’s longer-term housing woes on immigration levels would be a policy cop-out. Rising demand — whether from a growing population or higher incomes — doesn’t drive up prices in isolation. Prices are the result of demand meeting a planning system that blocks supply from responding. That’s the key point: it’s not “demand” or “supply” alone that matters, but their interaction.

In the 1930s rising housing demand produced more homes, not soaring prices. Yet after the war came the Town and Country Planning Act of 1947 and the creation of green belts. Britain’s discretionary planning system rationed land and made it more difficult to get building permission, creating an ever-tightening supply noose as the economy grew and hit planning’s constraints.

Until the 1990s the UK’s median house price to median income ratio was still around three. Today, Demographia puts that ratio at five for major housing markets. And it’s not just London or Cambridge with affordability issues. Between 1997 and 2022, house prices in England and Wales rose 2.3 times faster than wages. Derby now has a higher price to income ratio than Dallas, Plymouth than Portland, and Bristol than Boston. Government regulation is suppressing value; grant planning permission and land prices skyrocket.

Three decades of positive net migration has undoubtedly boosted that demand. One government study — at the highest end of estimates — suggests immigration may have pushed house prices up by 20 per cent between 1991 and 2016. Yet before you shout “aha!”, remember that house prices rose 300 per cent over that period and the same report estimated that income growth had over seven times the impact of net migration. Again, prices rise because rising demand, whatever its source, simply hits a planning system that refuses to deliver sufficient homes.

Cutting immigration is therefore no substitute for planning reform. Not only is a larger population already here, but even with future net migration at zero (which itself would create big problems in the labour market), housing demand would rise as wages grow, fuelling demand for space, second homes and modern amenities. Failing to allow supply where people want to live won’t just mean pricier housing, it will continually stifle productive industry.

My sincere hope, therefore, is that the Conservatives resist scapegoating immigration and instead follow the Canadian Conservative leader Pierre Poilievre’s lead. Poilievre, whom the Tory leader Kemi Badenoch recently met, has pressured Justin Trudeau’s government relentlessly to take bold action on housebuilding. Britain’s Tories should follow suit, hold Labour to account and demand planning reform is finally seen through.

The alternative politics of opposition for its own sake, though, will be sorely tempting, especially given today’s immigration-hostile zeitgeist.