Progress | Centre-left Labour politics

Supplying demand

Theresa May finally seems to understand the scale of the crisis, says Jack May. It is just a shame that she has all the wrong answers.

Between Sajid Javid’s big interview in the Sunday Times and Theresa May’s speech to the National Planning Conference yesterday, it seems the Tories have decided they better have a pop at tackling this whole housing conundrum.

This is an issue that everyone across the political spectrum thinks we need to get a handle on. Jeremy Corbyn and the left talk about building vast numbers of homes for people who are hard-up, and figures towards the right agree that housing costs in the United Kingdom are out of control – Matt (viscount, no less) Ridley’s Times column yesterday called Britain an ‘outlier’ thanks to our extreme costs, and called for a cure to ‘Britain’s addiction to property’.

May said young people are ‘right to be angry’ at being unable to afford to buy a home, and she is right. A deposit that would have taken a few years to save up twenty years ago now takes decades – and even most of a lifetime in London. She said the problem is ‘exacerbating divisions’ between generations. While average wages for millennials are higher than previous generations enjoyed at the same time in their lives, their home ownership rates have crashed in comparison. Fantastic. Problem identified. Time to crush the saboteurs and come up with a solution.

Or not. While Theresa May is right to say that developers succeed by building enough homes to turn healthy profits but not enough to fully fix the housing crisis, to call it a ‘perverse incentive’ and chide bosses for it is naive. This is the free market at work, and if she thinks it is wrong, she should just join the Labour party. As an aside, asserting that developers should ‘do their duty to Britain’ is fifty per cent idiotic and fifty per cent sinister. More than anything else, this is pointless jingoism that will not do anything to remedy the problem. Quelle surprise.

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At the same time, while taking on councils may seem like a nice way to go – everyone’s grumpy with their local authority because of some bin-related feud or other – this has little foundation in reality. As Lord Porter, chair of the local government association, says, councils are not the problem. They are approving ninety per cent of applications, but they are facing a system whereby almost twice as many planning permissions were granted in the last year as actual homes were delivered.

If May wants councils to better pull their weight, having a go at them makes no sense. Removing the restrictions on councils borrowing is especially imperative now that the nation’s finances are returning to a healthier position – we are now in surplus on current spending. The Tories should take the opportunity to say – as cynical and political as it is – that savings during the crunch years were needed to allow them to now encourage spending on housing. While there may have been sense in discouraging spiralling debt while the national picture was far from reassuring – and the UK’s credit rating was downgraded – continuing to block councils from building the social housing they want, and need, to build is no longer a credible position. Councils want to do their bit – it is time we let them.

The core of the problem is that government action so far has been demand-side – tinkering to make it nominally easier for people to buy homes – rather than supply-side – encouraging the building of new homes. When more and more young people are living with their parents until later ages, and young couples and professionals are forced to rent in flat shares when they really want to be setting up their own household, packages like Help To Buy only serve to keep prices buoyant by sustaining pressure on demand while doing nothing about supply.

Help To Buy will not work – we need Help to Build.

Britain’s planning system is unique. Instead of providing regulations on what kind of thing you can build – ensuring good quality homes, Britain essentially nationalised the right to build. This business of approaching the state and asking if you can build something is not normal, and we need a better approach. Mimicking a more European-style system, whereby government, local councils, town councils, and even parish councils can choose a set of parameters or a vernacular for building, would then allow individuals, developers, and communities to build more freely outside of the current cronyism of the planning system. Organisations like Create Streets and London YIMBY are doing fascinating things setting out how this could work, and we must keep involving them more in policy conversations.

Help to Build should reform the way ‘affordable housing’ works, too. The current threshold of ‘affordable’ is much too high for the vast bulk of people in need of it. Simultaneously, restrictive approaches like Sadiq Khan’s – by which the majority of homes must be ‘affordable’ to see some developments approved – only serve to get no homes built at all. We have to face the facts – it is better to build any homes in an awkward compromise than build none at all in the pride of principle. Let’s lower the definition of ‘affordable’ down to a genuinely affordable level, but stop setting unrealistic expectations for how many we can demand.

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Individuals and communities should be encouraged, too – and why not mirror the creative aspects of the current Help to Buy package. Where Help to Buy has an equity loan for people looking to buy a new-build home, Help to Build could offer an equity loan to cover the cost of building a new home where nothing stood before. Just like the current equity loan, it could be interest-free for the first five years, and repayable when you sell on the new house you have built yourself. Looking at interest-free loans for those willing to build annexes or loft flats extending their property is another option.

As well as creating a building climate, we must change our toxic relationship with property as an asset. The notion that by buying a home you have an inexorable right to see its value soar and soar while you do absolutely nothing to earn that wealth has got to go. Removing the property exemption on capital gains tax could be a useful way to restrict the gargantuan profits many are due to make by sitting on properties – and raise revenue that could be spent on housing. Incentivisation could become a part of this – as with most tax frameworks. Those downsizing from oversized homes they do not use could see an limited exemption, and in those places more in need of smaller properties for the young professionals local labour markets need – say, for example, London, St Albans, Cambridge and Oxford – an exemption or deduction could be made for those converting larger homes into smaller flats for sale.

Fundamentally, we need bold ideas to tackle what is an extraordinary crisis. While some things are an easier fix – looking in detail at the green belt and working out what is beautiful natural land worth protecting and what is run-down, decrepit, miscategorised land (as so much of it is); allowing councils to borrow to build the social housing we need to cut waiting lists from their current extraordinary list; enacting policy to boost supply rather than further overheating demand – we need big ideas to change our toxic relationship with property.

Whether we can trust May’s lame-duck government or Corbyn’s backward-looking statist leadership to come up with those ideas is, sadly, another question entirely.


Jack May is a Progress columnist. He tweets at @JackO_May


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