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Building more homes won’t slash prices

If there’s one police Gordon Brown is determined to deliver, says John Rentoul, it’s affordable housing. Everyone seems to agree that prices are too high, and our PM thinks he has just the solution: to increase the supply by building 3 million new homes in the next 12 years. But if he thinks this will force prices down, he’s in for a shock. In some markets, increasing supply simply feeds, rather than satisfies demand. We know, for instance, that building more motorway lanes generates more traffic, just as we know that a third runaway at Heathrow will ease congestion only in the shortest of terms: the easier it is to fly, the more people will do it. And it is the same with houses. The success of the British economy has attracted a million workers in the past decade, adding to the demand for housing. If more homes are built, it will just encourage more people to come here to live and work. Brown’s “predict and provide” approach to housing is totally misguided. The only reason he’s getting away with it is that the Tories are barking up the same wrong tree.

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