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Britain is building too many small homes - two-bedroom flats - and not nearly enough family houses. The annual shortage of three-bedroom homes is now put at 350,000 1. Furthermore, our dwellings are sub-standard by international comparison. The Policy Exchange has published two papers 2 which look at this.

They find that Britain's new houses are only 76m 2 on average - a far cry from the 109m 2 in Germany, 116m 2 in the Netherlands or 137m 2 in Denmark. Britain's stock is also comparatively old, with 38.5 per cent of dwellings built before 1945. In Italy, Germany and Austria this is below 30 per cent and in Ireland, Portugal, Greece and Finland it is below 20 per cent. But while these figures suggest the British dwelling stock is of rather poor quality, nowhere, over the past three decades, has house price inflation been stronger than in the UK; British property prices have more than tripled.

It seems that the rest of the developed world enjoys living in modern, spacious and affordable accommodation, while we 'live in houses where single-glazing windows moving against each other can hardly be cleaned and hot and cold water runs from two separate taps'as the Frankfurter Allgemeine Zeitung recently parodied.

Policy Exchange research fellow Dr Oliver Hartwich says that the planning system has made it possible to control, and effectively to restrain, the housing supply. However, a planning system that produces such poor-quality housing could only persist over time because it was justified on the grounds of some public interest.

He said: 'The British have been led to believe they are living on an overcrowded island, that the countryside has almost disappeared under concrete and that building on brownfields and protecting greenfields is absolutely necessary. Nothing, could be further from the truth.'

Debunking each of these myths, Hartwich points out that far from being overcrowded, only around 8 per cent of the UK is urbanised; urbanisation is much higher in the North West than the South East;

plants and animals thrive in low-density residential areas;

and agricultural land is overprotected and subsidised.

To see if other countries are more successful in delivering bigger, better and cheaper homes, Hartwich compared the situation in the UK with that in Germany, Switzerland, Ireland and Australia. Of the four countries examined, Ireland and Australia derive their planning systems from the British model and the housing problems bear a strong resemblance to the British situation, with rising prices and frustrated first-time buyers.

He said: 'Germany and Switzerland, in contrast, operate localised zoning systems under which local planners and politicians are directly confronted with the effects of their decisions. Local politicians know that their budgets largely depend on attracting new residents, and planning policy has a strong influence on their budgets.

This forces the local politicians to engage in competition (literally) to make their cities more 'attractive' - meaning both pleasant places to live and places that will draw more inhabitants.' If this is the key to their success - a localised and incentivised system of competition in planning - then it should not be difficult to figure out the important lessons for Britain.

1. RICS five-year housing review 2. Unaffordable Housing - Fables and Myths; Bigger, Better, Faster. Visit:

www. policyexchange. org. uk

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