Haslemere is a town with enormous charm and historic character. Sadly its beauty has to compete with the nightmare of traffic congestion around the A3 at Hindhead, about which I called a recent parliamentary debate.But Haslemere has never before had to deal before with an additional threat: the impact of the government’s flawed housing policy. In a nutshell this commits the South East of England to building 29,000 new houses per annum until 2026, around 5000 of which will be in Waverley. As Waverley is very short of “brownfield” space much of this is likely to be by infilling – pulling down large houses with gardens and replacing them with mini blocks of flats.What does 5000 houses mean in practice? The average family has just under two cars, so there could be an extra 8000 cars in the area. Each car belts out 5.8 tonnes of carbon dioxide annually. For Waverly, therefore, this means nearly 58,000 tonnes of extra pollution. There will also be a phenomenal increase in demand for school places and doctors: based on the official figures, Waverley will need to provide up to an extra 9000 school places and 80,000 GP appointments. There are of course some economic benefits, but Haslemere’s issue has never been promoting economic growth, but rather containing it.All this arises because of a totally flawed report into housing published by the economist Kate Barker in March 2004. The report, which has been accepted by the government, says that the UK needs to build 120,000 new houses per annum in order to bring the rate of house price inflation down to the European average. What ever, I wonder, happened to all those lessons of the 1980s about not “bucking the market”?. The rot in housing policy, I believe, sunk in much earlier with the 1947 Town and Country Planning Act. Countryside campaigners love the act because it set up Green Belts. But established in a time when state planning was very much in vogue, whether for heavy industry, exchange rates or the health service, it also established the principal that it was the government’s job to “decide” how many houses needed to be built.Just as in other areas, state planning has been a total failure. Houses in Britain are older, pokier and more expensive than in many similar countries in Europe. New houses in Germany are nearly half as big again as those being built in the UK, despite a similar population density.More significantly the rise in prices, caused by the failure of state policies to match supply and demand, has meant prices increasing at around 2.4% per annum, more than double the average European rate of 1.1%. Whilst that feels good to those of us that own houses, it is actually a fool’s paradise. Young people are priced out of the market, people are forced to commute long distances, and for many the only prospect of owning the kind of house they would really like is to wait for their parents to die (by which time they too will probably be thinking of downsizing).There is of course a genuine balance to be struck between policies that will allow young people onto the housing ladder and protecting the character of towns like Haslemere and its surrounding countryside. But current policy fails to do either.If the new houses in Waverley were all to help young people and “key workers” get on the housing ladder, there might be some justification. They will not. The vast majority of them will be sold at commercial rates and therefore of no use buyers currently priced out of the market. What the new houses will do, however, is put at risk the countryside that is vital for one of the most congested parts of the country. We should not forget that land once built on virtually never returns to being countryside. So central planning, however well-intentioned, not only fails in its central objective. It also does real and lasting damage to the environment.A good analogy is the set of roadworks now being completed on the M25. The section around Heathrow has been increased to 10 lanes. Presumably in 20 years time economic growth will again mean the need for further lanes. So what will the government do? Increase it to 20 lanes? And then 40 lanes? Of course not. In the end, rather than constantly increasing supply, you have to allow the market to ration demand.That is why the best approach to the affordable housing problem is not to increase supply, but look at schemes to help key workers and young people price themselves into the market. We should decentralise pay rates for workers such as doctors, nurses, teachers and the police so that they can be paid in a way that reflects their local cost of living. We should allow tenants in social housing schemes to part-buy or buy their homes just as we allowed council tenants to buy their own homes.Most of all we need to recognise that the system of centralised planning, set in place by the 1947 Town and Country Planning Act, needs to be scrapped in favour of allowing local councils to have the final say in planning policy for their area. Too many times the wishes of local people are overturned by the planning inspectorate in Bristol. There are two very strong arguments as to why the local route is best. Firstly because there is an enormous democratic deficit in housing policy. Housing allocations for each region are decided by unelected regional assemblies and then “divvied up” by local authority. If developers appeal against planning refusals made by local authorities, the final decision is made by a quango in Bristol which works to national housing targets. So despite living in one of the oldest democracies in the world, we can do nothing but watch in silent fury as our streets and neighbourhoods are ruined. The second reason is because planning decisions are often finely balanced and need to be closely attuned to the needs of the area they affect. Far from being “nimbys” most people in Haslemere are acutely aware of the problem of affordable housing. But deciding how to strike the right balance is best left to the people who live in the areas that face these challenges. In the US this means different localities adopt different “zoning policies” to account for local needs. In the UK this could mean a much bigger drive to attract housing in less economically vibrant parts of the country, and more affordable (as opposed to commercial) housing in the South East. Central planning has failed. It’s time to find another way.