AT A crossroads on the edge of Aylesbury, a town in Buckinghamshire, a new neighbourhood is taking root. Grass verges are marked with the signs of half a dozen housing developers. Hoardings advertise government-backed “help-to-buy” mortgages. New roads end in red brick houses, packed tight into squares. At sunset, children trickle out of a boxy school surrounded by building sites. The development feels rather disconnected from its surroundings—and it is. Though the capital is 40 miles away, across green fields, this is in effect London’s newest suburb.

Last year some 840 new homes were started in Aylesbury Vale, adding 1% to the district’s stock of houses. In England, that qualifies as a building boom: in the country as a whole the rate of construction is almost three times slower. Stoked by government intervention, low interest rates, a nascent economic recovery and a lack of supply, house prices are rising across most of England and soaring in London and the south-east. In the final quarter of 2013 prices were increasing at an annual rate of 7% across Britain and 15% in London. Yet house building is still in a slump (see chart). The new development in Aylesbury helps explain why.

Private house-building in Britain is regulated by the Town and Country Planning Act, introduced by a Labour government in 1947. At the time it was thought that benevolent government planning would provide well-built homes and protect the countryside from the unsightly “bungaloid” sprawl of the 1920s and 1930s, when private house-building in England neared 270,000 units per year (in 2012 the country managed just 89,000 new private homes). Under the planning system, owners’ rights to develop land are strictly controlled. Local councils determine what purposes land can be used for, and planning permission to build houses is only granted according to a strict local plan. On the edges of big cities, green belts designated in the 1940s and 1950s make building even harder.

In the postwar years lots of new homes went up anyway. Urban councils enthusiastically cleared slums and built vast new housing estates, which they rented out to local residents from a waiting-list. But in the early 1980s Margaret Thatcher’s Conservative government all but banned councils from building, while largely preserving the restrictions on private development. In the 1990s environmental regulations made things more complex. Then Tony Blair’s Labour government insisted that post-industrial “brownfield” land be prioritised over green fields, which are usually cheaper to build on.

All of this has gradually reduced the amount of land released. And, says Paul Cheshire at the London School of Economics, it has pushed what building there is to the wrong places. Before the recession over half of new dwellings built were flats, often in northern cities. When mortgage finance dried up in 2008, these collapsed in value. The few suburban homes that go up are often far outside city boundaries, pushed out by green belts. Aylesbury is growing because it is just beyond London’s green belt (see map). The new residents of such places are stuck with long, expensive commutes. Near successful cities like Oxford, or in the London green belt, land with planning permission can cost hundreds of times more than farming land, more than doubling the cost of a new house. The shortage of land also accounts for Britain’s uncompetitive building industry. Because land is so scarce, house-builders behave like speculators: they devote their resources to finding and buying sites that might get planning permission. Even a small rise in house prices feeds into a big rise in land values as bidding wars break out. In such a tight market, deep-pocketed builders prevail. Since 2008 the number of small house builders—those that put up between 10 and 30 units per year—has fallen by 50%. The number of big builders has increased slightly. Weak competition means that builders have little incentive to invest in design, which may explain why new homes are often unlovely. And since these firms often operate as little local monopolies, they rarely cut prices: if prices are not suitably high, they tend to undershoot even the low targets set by councils. To try to break the deadlock, the coalition government has pushed through planning reforms, which include a controversial “presumption in favour of sustainable development”. In practice this means councils deemed too NIMBYish by Westminster can be forced to approve more housing, or else risk uncontrolled speculative development. This modest reform has cost enormous political capital and tied the government up in lawsuits with unhappy councils. Yet it will merely neutralise another of the coalition’s reforms, says Adam Challis of Jones Lang LaSalle, a property firm. Soon after coming to power, the government scrapped the regional housing targets introduced by Labour, which had boosted building.