How to solve the housing crisis

Fifteen years ago, the UK government and the Greater London Authority promised an ‘urban renaissance’, as set out in the report of the Urban Taskforce led by Sir Richard Rogers. Today, young workers have been priced out of London and other major cities, as both rents and house prices have risen beyond their reach.

The policy wonks of Urban Taskforce looked forward to a renaissance, as yuppies moving out of the suburbs led the gentrification of the inner cities. They were extrapolating from their own narrow experience of such hotspots as Hoxton, Notting Hill and a handful of riverside developments. To recreate the whole of Britain in their own image, they promoted the mantra of urbanism (against suburbanism), ‘building up, not out’, and garden-free studio-living in flats for professional couples, as if the whole country could be one continuous café society.

As a fantasy, the Urban Renaissance might have been comical, but not harmful. But the fantasy was put into practice. The Task Force and the regional authorities used planning laws to impose the goal that new building would only take place on derelict (‘brownfield’) land and not on greenfield sites. Here, they were supported by an accidental but surprisingly powerful coalition of environmentalists opposed to sprawl and Home Counties Tories saying ‘not in my backyard’ to new housing estates. The impact of these restrictions was that housebuilding fell to under 200,000 a year.

Today, the results of this massive social experiment are plain for all to see. First, the supply of new houses has fallen well below demand, with predictable results: the average house price is a prohibitive £238,293 in the UK, £279,593 in the south-east of England, and as much as £445,651 in Greater London.

No sector more clearly shows how Britain gave up on development but carried on dreaming of prosperity than the housing market. Economists even lauded the housing market as a success story. So it was. House prices kept on rising. So much so that today the entire housing stock is worth five trillion pounds. But this growth was entirely financial. Every year, Britain’s over-mortgaged property-owners sink another £63 billion in interest payments into their homes. But the housing stock itself is in decay, as fewer houses were built each year than were needed to replace the over-valued but dilapidated dwellings. No other sector of the economy could continue to absorb all of this investment while its productivity dwindled to nothing. Estate agents are really just part of the antiques market, trading over-priced rarities that often date back to the nineteenth century.

When spiked first warned about the way that the shortfall in new building would push up prices, people queued up to deny the obvious. House-price rises, they said, were due to the banks’ all-too-cheap credit, not because of a real shortage. But even after the credit crunch, house prices today are climbing up much faster than inflation. That’s because the problem was much deeper than cheap credit – it was due to the shortfall in new building. While the rest of the economy has stagnated, house prices are back up again, so that wages cannot begin to keep pace.

Thankfully, some commentators have begun to pay attention to the fact that there needs to be new building. Labour supporters like columnists Owen Jones and Polly Toynbee have broken ranks with the anti-growth lobby to demand more homes. On the other side of the spectrum, Tory ministers like Nick Boles and Eric Pickles have admitted that Britain has a problem with new building that needs to be addressed.

Sadly, these small sparks of understanding are quickly extinguished. Jones and Toynbee are only interested in the housing problem insofar as they hope it illustrates their belief that a return to state-owned council housing is the answer. Government must meet the shortfall in new building, they say. Pickles and Boles are equally doctrinal. The free market is the answer, and planning must be liberalised.

Neither side is wrong. In principle, the government could kickstart housebuilding (as housing minister Richard Crossman did in the heyday of housebuilding, the 1960s – though even then only around half of all homes were built for the public sector). But what Jones and Toynbee are really saying is that there will be no solution to homelessness until the country realises that state socialism is the answer. Since there is no popular demand for this imaginary New Jerusalem, their call for council-house building is just cynical, using the issue to embarrass the government but really just kicking the ball into the long grass.

The government’s position is just as meaningless. Ministers talk about a free-market solution to the restrictions on housebuilding. But in fact they have failed to make it any easier for new homes to be built. In September, a new housing minister, Mark Prisk, was appointed. Prisk’s major contribution on housing before that was to demand an even more restrictive ‘green belt’ ban on new developments. On his website, he promises ‘the green belt will remain an important protection against urban sprawl, providing a “green lung” around our major towns and cities’ – so house-building will be choked off.

Left and right alike are reluctant to address the source of the housing problem, which is a problem of production: the building of new homes. While they pay lip service to the need to house people, they are terrified of the social impact that real growth would bring. That is why, in the small print, all sides of the debate insist in their different ways that new building must be controlled by the authorities.

Refusing to address the problem of building new homes, the argument over housing has turned instead to a poisonous row over distribution, how to share out the shrinking cake. Now that the consequences of not building are upon us, too many people prefer to avoid the problem with a false argument about who deserves what.

All of the government’s practical policies are attempts to change the way that the housing stock is shared out. Their biggest idea to date is the ‘bedroom tax’, a limit on housing benefits for those claimants who have ‘too many’ rooms for the number in their household. This is a mean-spirited and draconian move that has rightly drawn protests across the country. There are, of course, all sorts of reasons that people might have more rooms, like an older son or daughter moving out, or a death in the family – and it is hateful that they should be penalised for it.

The bedroom tax is the height of parsimonious austerity politics. It was dreamt up, though, not by the Conservatives, but by George Monbiot, the leading environment columnist of the Guardian newspaper, who first called for ‘a better distribution of the housing we’ve built already’ saying ‘those who use more than their fair share should pay for the privilege, with a big tax penalty for under-occupation’.

Wheezes like the bedroom tax will do nothing to fix the housing problem, because it is not a problem of distribution. There are not, despite the fantasies of Mark Prisk and George Monbiot, too many empty rooms. On the contrary, there is a serious and growing problem of overcrowding, as grown-up children have to live with mum and dad, and as landlords subdivide houses and even let out cellars and gardensheds to hard-pressed tenants.

The government’s other priorities, such as persecuting ‘nuisance neighbours’, evicting squatters and clearing away homeless people’s makeshift shelters, are all signs of a desperate lashing-out at the victims of the housing shortage, when they should be getting more houses built.

When spiked first sounded the alert over Britain’s rising house prices, many people avoided the issue. Some of them said it was not a problem of house-building, but of Britain’s fixation with home ownership. If only Britons would rent homes, like they do on the continent, then things would sort themselves out. ‘There’s a lot to be said for renting’, according to architecture writer Owen Hatherley.

Of course, there is nothing wrong with renting as such. The contractual terms we use to secure a home are a secondary question. Where the renting champions go wrong, though, is in thinking that rents are immune from the pressures that are pushing up prices. The London Evening Standard reports that rents in London have rocketed precisely because fewer people can afford to buy, meaning that the demand for rented homes is now spiralling, too. The average monthly rent in London is £1,106, up 7.9 per cent on last year, while wages are at a standstill.

Rents are no more immune from the impact of under-supply than purchase prices. Hatherley is right, though, about one thing. With housing getting more expensive, more people are renting – but few of them will be grateful for the opportunity to enrich their landlords.

The solution to the housing crisis is not simple, and it is not surprising that there are many arguments about what to do. But substantially, the ocean liner that is the housing industry will not be turned around until there is a real determination to build, and to build millions of homes, with the support of both government and private capital, and an end to the restrictions on development. That change in culture will not happen while commentators and policymakers carry on avoiding the fact that the ship is sinking, and keep on turning instead to argue about how to rearrange the deckchairs.

James Heartfield is author of Let’s Build! Why We Need Five Million New Homes in the Next 10 Years. (Buy this book from Amazon(UK).) He is also author of The Aborigines’ Protection Society: Humanitarian Imperialism in Australia, New Zealand, Fiji, Canada, South Africa, and the Congo, 1836-1909. James is a co-founder of Audacity.