From Christian A. L. Hilber of the London School of Economics and Wouter Vermeulen of the CPB Netherlands Bureau for Economic Policy Analysis who it is reported find that:
...house prices in England would have risen by about 100 percentage points fewer, after adjusting for consumer price inflation, from 1974 to 2008, in the absence of regulatory constraints to housebuilding. In other words, they would have shot up from £79,000 to £147,000, instead of £226,000. Another way of putting this is that prices would have been 35pc cheaper.
Planners everywhere are adamant that this isn't so and that some other problem causes high house prices - banks, people moving to the city, the weather, anything except the deliberate limitation of supply of land for building housing. They even invent twee little economic theories to explain (one's that are predicated on land supply being less than demand for housing land).
The uncomfortable truth is that planning restrictions - not just velocity but actual land supply constraint - is the essential reason for the UK's relatively expensive housing. And absolutely the reason for London's unaffordable housing. It's true that, in the short term releasing land for housing doesn't increase supply - those houses have to be built and this takes time - but over a reasonable time (say, five years since that is the period beloved of planners everywhere) supply will balance with demand.
Housing in London would still be expensive - lots of people want to live there after all - but the speculative element of development would be reduced. And the biggest change would be a shift from the industrial production of housing to standardised schemes towards more individuals and small scale development. One of the sweetest ironies of planning liberalisation is that the big national housebuilders are those with the most to lose.