Artificial Scarcity in Housebuilding and the Impact on Affordability: The Return of Absolute Rent

Abstract

The slow response of volume housebuilders to changes in demand has been cited as a contributing cause of a global crisis of housing affordability and allegations of land banking have persistently dogged the industry. This article reviews the supply responsiveness of speculative housebuilders in the United Kingdom and Australia through the neglected Marxian analytic category of absolute rent. Absolute rent directs attention to the relationship between the value of land and the cost of housing and models a market in which landowners may withdraw land from supply to inflate prices. Through the lens of absolute rent, the real estate practices of the housebuilding industry can be understood as a strategy of artificial scarcity straddling land and housing markets. The findings of this investigation demonstrate the insights to be gained by a return to absolute rent that valuably expand the current debate on the supply and cost of housing.