Scary Prospect of house building – or house prices up

In last week’s Sunday Times, David Higgins claimed that if HS2 was not built, then there would have to be a massive house building project on the green belt.

The Times said

VAST swathes of countryside in southeast England will be destroyed by house-building unless a proposed £50bn high-speed railway is built to rebalance Britain’s economy, Sir David Higgins, who is chairman of the HS2 project, warned this weekend….

The scheme, which links London to Birmingham and then cities further north, would unlock the “massive” amount of available brownfield land in Leeds and Manchester for house-building, which would help tackle the country’s chronic housing shortage.

But what Higgins forgot to mention is the unfortunate side effect, which is that house prices in these cities will inevitably rise.

A London-Manchester season ticket is currently an eye-watering £14,336 per year, only marginally cheaper than a Leeds-London season ticket at £13,908.  With HS2 fares currently assumed to be the same as conventional speed trains, its clear that only the highest paid would be able to afford to commute at fares like these.

But this will have a knock-on effect on house prices in these places.  If you have London-based employees on London salaries buying houses in these northern cities,  then house prices will increase, making them less affordable for local residents on local salaries.

However, Higgins analysis is flawed, just like the rest of the case for HS2.

The London Housing Stratedy estimates that at least 42,000 new homes per year will be needed in London: HS2 will not solve this.

HS2 will have around 18,000 seats per hour. Even if every seat on HS2 during peak hours was used by a commuter, it’s clear that this would only delay the need for new houses for a year or so.  And with HS2 not due to open for over a decade, it will be far too little, far too late.

The other interesting information from last week’s Sunday Times is their poll.  Asked to rank government infrastructure, HS2 came at the bottom of their poll of potential government investments.  Building social housing was second, after building new hospitals.