IMF's Lagarde: Build on Greenfield Land

Christine Lagarde, the Managing Director of the International Monetary Fund cited the need for housing market reform at the conclusion of discussions with the government of the United Kingdom on Friday, June 6.

The housing market in the United Kingdom has experienced a long and continuing escalation in prices relative to incomes, largely due to the nation's strict urban containment policies that date from the 1947 Town and Country Planning Act, and significant further restrictions put in place during the Blair government.

According to Ms. Lagarde:

"But rising house prices fundamentally reflect demand that greatly exceeds supply. Addressing imbalances in the housing market by alleviating supply-side constraints will require further measures to increase the availability of land for development and to remove unnecessary constraints on land use."

The Daily Mail further reported that Ms. Lagarde "called for ‘unnecessary’ restrictions on building on greenfield sites to be lifted, so the supply of houses can be increased. This, she said, would help stabilise prices.

The United Kingdom's restrictive land use regulations have been a model for restrictive land use regimes from Sydney to Vancouver, Auckland, Portland and California. They have been responsible for driving up house prices relative to incomes, which reduces household discretionary incomes. The result is lower standards of living and higher rates of poverty. London School of Economics professor Paul Cheshire has concluded that urban containment policy is irreconcilable with housing affordability.