Liberalisation of planning laws is the answer to housing crisis, Lib Dems told

The answer to the UK's housing crisis is a massive liberalisation of the planning laws, allowing developers to concrete over much more of the countryside. That was the controversial view put forward by Mark Littlewood, director general of the free market thinktank the Institute for Economic Affairs, at a heated fringe meeting sponsored by Moat housing association at the Liberal Democrat conference.

Littlewood argued that Britain's housing crisis was caused by a lack of supply and the only way to solve it was to free up the planning laws to such an extent that builders could provide a huge supply of houses needed to meet demand. His remarks provoked a strong response from the audience, many of whom objected to his proposals for what seemed to be the virtually unregulated building of houses across the country.

But he remained unrepentant, insisting that a radical solution was needed to solve a growing crisis and that solution was "growing the supply side not just fiddling around with the demand side".

Littlewood said: "What we need will require incredibly brave politicians and that is utterly enormous planning liberalisation." And he added: "Only 5% of the land in the UK is under concrete. If you double the amount under concrete to 10%, you could solve the housing crisis in a small number of years."

When one member of the audience asked him whether he had ever been to Mexico City – where he would see the results of unregulated development, Littlewood stressed that he did not expect Mexico City to spring up in the hills of West Devon before warning that the problem would only get worse until and unless politicians had the guts to tackle it.

He suggested that other countries provided considerable incentives for compulsory purchase and for communities that backed big industrial developments, like power stations, and this model could be used in Britain too.

Stephen Gilbert, the Liberal Democrat MP for St Austell and Newquay, did not go as far as endorsing Littlewood's radical solution, although he conceded that the government had to do more. Gilbert agreed that housing was in crisis but said the blame had to shared with previous governments. He said: "I do not think this government is doing enough but that is in the context of both previous governments doing woefully little in what is becoming a very serious issue."

And he added: "At a political level, we need to wake up and smell the coffee and realise that housing policy is in crisis."

Gilbert argued that the Liberal Democrats could gain electorally if they were the first politicians to embrace change and come up with real solutions to the housing problem.

But he said it was as much for councils to open up space for development as it was for central government to set the agenda. And he declared: "Under this government, the number of affordable homes will continue to rise."

Elizabeth Austerberry, the chief executive of Moat, one of the south east's leading housing associations and the sponsor of the event, warned that the housing crisis could become dire by 2015 because of the combination of benefit changes, a lack of new-build affordable housing and changes to the way houses were financed. "At the end of this current affordable homes programme in 2015, we could see housing supply falling off a cliff."

Mark Littlewood, Stephen Gilbert and Elizabeth Austerberry were speaking at the Liberal Democrat party conference Guardian fringe event on 17 September.

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