How micro-homes can help fix the housing crisis



The UK has a housing problem that bears heavily upon young people. There are not enough homes in places where people want to live. Houses are too expensive for most young first-time buyers, many of whom cannot save for a mortgage deposit because they spend so much on rent. Renting itself can be difficult, expensive and precarious for many young people starting out in employment.

These problems lead demagogues to advocate rent controls, a policy that in practice always makes things worse. It benefits some current tenants, but dries up the supply for any future ones, deters potential future landlords, hinders mobility, and leads to lower maintenance standards and deterioration of properties.

The housing supply shortage is almost entirely caused by planning restrictions, including imposed requirements for a proportion of social housing, and green belt restrictions that prevent cities growing outward. The cost of land with planning permission is a very high proportion of the cost of new housing.

The shortage of land could be eased by allowing homes to be built on land within the green belt that is not particularly green, including distressed land such as abandoned factories or former filling stations, and land used for intensive monoculture farming that is by no means green. The shortage is not of social housing, but of total housing, and a tiny proportion of such land could make up that shortfall.

Many new homes could be built within cities by changing the regulations concerning size. Young people might happily settle for small units that have a fairly small living room with a folding bed, kitchen area and bathroom annex. These could be developed by converting office and retail space that is no longer needed into blocks of micro-homes, and by easing the height restrictions to allow denser accommodation on existing sites. These would be more affordable than homes built to the current regulations. Many young people in cities spend much time outside, socializing in pubs, wine bars and coffee houses, and really want somewhere to sleep and not much more. One advantage of choosing a micro-home within the city is that it saves the cost and environmental impact of commuting from farther out.

Those people who reached the stage of wanting to start a family would have equity built up in the micro-home that could go towards the deposit on a larger home. Allowing more homes at the edge of cities, and micro-homes from converted properties within them, are both small solutions that would go a long way toward solving what is for many young people a very big problem.

Madsen Pirie is President of the Adam Smith Institute