It does make me rather cross when the great and good - doubtless living is a splendid multi-million pound home that benefits from rising urban land values - completely fail to understand that it is planning restrictions that causes the problem. Just that, nothing else.
Here's Adair Turner doing just this:
In many countries, the majority of that wealth – and the lion’s share of the increase – is accounted for by housing and commercial real estate, and most of that wealth resides not in the value of the buildings, but in the value of the urban land on which it sits.
That might seem odd. Though we live in the hi-tech virtual world of the Internet, the value of the most physical thing – land – is rising relentlessly. But there is no contradiction: The price of land is rising because of rapid technological progress. In an age of information and communication technology (ICT), it is inevitable that we value what an ICT-intensive economy cannot create.
This is arrant nonsense. Land is expensive in London because it is scarce and it is especially scarce because we've put all sorts of restrictions on using that land including identifying large tracts of land around the city where you can't build. Another bunch of folk want to make it even worse by stopping tall buildings, banning basements and preventing changing use from commercial to residential.
Planning reforms won't make London's land cheap but it would stop that mad rise in values Lord Turner speaks of. For sure you could 'fix' the problem his way - put up interest rates, make it harder to buy and beyond the means of all but folk like Adair. Except that wouldn't solve the problem because the problem is planning. It really is that simple.
If you want to read a better written, better informed and thoughtful piece on this problem turn aside from Turner's ignorant wibble and read this piece by Kim-Mai Cutler about San Francisco's housing problems. I don't entirely agree with Kin-Mai's assessment but at, unlike Lord Turner, she appears to know what she's talking about.