There is no housing crisis. There is just a housing market. There is no housing “need”, unless you are sleeping in the street. There is just housing demand and housing supply. There is also housing panic, housing lobbyists and housing stark raving madness, the last much in evidence last week.
The news that the government wants all children to learn economics is fine but ministers should go to the head of the queue.
The housing policy that Gordon Brown set out in his “Queen’s speech” was based on nothing more substantial than anecdote. Everyone knows a house that is worth five times more than “some time ago”. Everyone knows someone frantic to get “onto the housing ladder”. Everyone is eager to buy or sell. House prices are second only to sex on the mind of the macho British male.
The assumption that every adult citizen has a “right to a decent home” that they can “afford”, courtesy of the government, must be the last hangover of postwar socialism and a brainless basis for policy. It is matched only by the archaic belief of Yvette Cooper, the housing minister, that this right is reflected in a fixed stock of “housing need” unrelated to price or any other financial variable. She must think she is running Moscow’s housing department in the 1950s.
Cooper claims her Rip van Winkle officials have identified a “shortfall between demand and supply” of 40,000 units nationwide for people wanting a house they have not got but would like at a price they can afford. A sympathetic Brown agrees and says he will subsidise “the bulk” of them.
Thank goodness they are not measuring the need for road space or foreign holidays. They would meet one by lowering fuel tax and the other with cheaper air fares.
Need in an open economy is demand and demand is a function of price and supply. This demand for 40,000 unavailable and affordable homes a year could vanish with a change in interest rates or a tax on underoccupancy or encouragement to students to live at home. All might be sensible policies but none is mentioned.
Meanwhile if I wanted to trump Cooper’s statistic I could point out that some 700,000 houses are standing empty and developers’ land banks have capacity for 300,000 unbuilt units. My units may not all be where people want to live, but then Cooper’s figure is equally nationwide.
The reality is that Britons squander their limited living space more than any country in Europe. Densities are low and estates sprawl. City and town centres are underoccupied while roads are clogged with traffic seeking out-of-town retailing which the government has all but decontrolled under pressure from the supermarkets. To make matters worse, successive governments, Margaret Thatcher’s worst of all, subsidised home ownership as a vehicle for savings. Brown cut the subsidy but collapsed confidence in private pensions and reinforced the belief that “a house is a pension”.
This has driven up house prices, led to panic hoarding of space and burdened young people with debt.
Owner-occupation in the United Kingdom is now 70% of housing tenure, against 42% in Germany and roughly half in most comparable countries. The private rented sector, the most fluid and efficient form of housing, is ridiculed and persecuted with red tape, comprising a mere 12% of the market, against 23% in France and 53% in Germany. In most countries young people rent until they have saved enough to settle down and start a family (usually when their parents can help them by “downsizing”). The British market is inflated by hundreds of thousands of young people entering it long before it makes sense for them to do so.
Even so, if we can tear our eyes away from crazy headlines about London prices, the rate of house price inflation has not wildly outstripped other forms of saving. Only in the past two years (of cyclical boom) have houses caught up with the 10-times rise in equities since 1980. Terrorising the British people out of lending to the productive economy into oversupplying themselves with living space has been the stupidest thing this government has done. Then to claim a “housing shortage” is absurd.
Nor is there anything exceptional or “critical” about present housing costs. Political attention focuses on first-time buyers. For them the key figure is not the purchase price of a house, which they will probably sell long before they have paid for it, but the cost of finance. Lower interest rates have led to this plummeting. Median housing payments for first-time buyers were 16% of income in 1975, 18.4% in 1980, a savage 27% in 1990, 14% in 2000 and 16.8% last year. That is why banks will lend five times income today as against three in the 1980s.
Against all evidence, Brown believes that house prices are rising in response to lack of supply rather than his policies. Yet at the same time he wants his additional supply to be “affordable”, which will not increase open market supply. Nor does he say what affordable means. Every house is affordable to someone and nothing is affordable to others. Since the word is code for subsidised, it should be relevant only to the poor. Yet it is confused with “key worker” housing for often well-paid public servants (private workers apparently being superfluous), and with an even more bizarre “right” of country people to a subsidised house near where they were brought up. If villages want to offer such charity locally that is their business, but it is hardly a claim on the state.
The housebuilders’ lobby argues that prices are high because of a shortage of developable land. There is no shortage of land any more than there is of houses. The prime minister might care to join me on a tour of Portsmouth or the Thames Gateway, of the west Midlands from Solihull to Wolverhampton, of Derbyshire and South Yorkshire from Chesterfield to Barnsley, of the Merseyside M62 corridor, of Wearside and Tyneside.
Acres of former industrial sites lie idle, often land that the Germans, French or Americans would have rescued and beautified long ago. Those who have Brown’s ear want rural land in the southeast because that is easy to sell. They resent the fact that the southeast is so desirable as to be very expensive. But then it is expensive to service, carbon-rich to occupy and often ruinous of amenity.
A sound planning policy would encourage all new developments towards city and town centres, expecially in the Midlands and north, for the simple reason that this uses roads, sewers, schools and shops more efficiently, discourages car use and promotes community. Urban Britain is woefully underdeveloped but this is reversible. In a matter of five years, the population of inner Liverpool has risen fivefold simply by good planning of private sector activity. It could rise another fivefold.
If such effort, backed by land clearance grants, were repeated across Britain, Brown’s new homes would emerge overnight.
Of course an expanding and prospering population will want more living space over time. But it will not sensibly be found Whitehall’s way, by fighting constant guerrilla warfare against those seeking to preserve rural Britain. A better policy would be to decide, here and now, how much of Britain should remain green in perpetuity and list it as such, as cities list their treasured buildings and conservation areas: how much should be national park, how much preserved as farmland or green belt, how much for leisure and how much has no landscape or amenity value at all.
Such “listing the landscape” would not be bureaucratic, since even more categories exist already for grant and planning purposes. It would have two beneficial results. It would protect, notionally for all time, a resource that Britons say they value above all other aspects of “Britishness”, the countryside. Its custodians, mostly farmers, are already subsidised to care for it, while those avaricious to build will know they have no more chance than if they wanted a skyscraper in Belgrave Square. This offers the greatest boon to sound development, that of certainty.
The other benefit would be ironic. I believe a large acreage of England (we might call it green/brown) would fall into my bottom category and thus be available for development, which could be the better planned for being predictable. Builders would get more land than under the present mix of corruption and contention. Landscape that merits preserving would be preserved. The market could roam free over what is left. Economics would triumph over idiocy.
