‘The housing crisis is storing up huge political anger’

‘The housing crisis is storing up huge political anger’

Liam Halligan on the causes and consequences of Britain’s chronic housing shortage.

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Topics Politics UK

Britain’s housing crisis can no longer be ignored. Governments of all stripes continually pledge to tackle the chronic shortage of homes and the soaring costs of renting and buying. But little ever seems to change. Liam Halligan’s new book Home Truths investigates the origins of the housing crisis and its dire consequences for the economy and for society. spiked spoke to him to find out more.

spiked: How bad is the housing crisis?

Liam Halligan: In the UK, the average home costs just over eight times average annual earnings, and the historic norm is between three and four times. That’s the crux of the unaffordability problem. On top of that, we’ve got far too few homes for social housing. And then on top of that, we’ve got a homelessness epidemic. The rate of homelessness has increased fourfold in the past 50 years. There is a chronic shortage of homes.

Young adults, in particular, whether they are young professionals or young people working in industry or manual labour, whatever they are doing, find it very, very difficult to buy a home. Half of all first-time buyers, rising to two thirds in the southeast, rely on the so-called Bank of Mum and Dad to buy a home. That’s fine if you’ve got parents who can do that for you. But if you don’t, you get left behind because then you end up paying a lot more each month in rent than you would if you were paying off a mortgage.

Also, when you’ve paid off a mortgage, you end up with a valuable asset. Living in a house with a mortgage, even if you don’t pay it off completely, gives you options to move throughout your life as you have a family and you need more space. You have none of those options if you rent. Then in old age, if you’ve rented all your life, you can’t keep paying rent when you’re not working. The state pension isn’t going to pay your rent so you do need social housing.

The housing crisis is storing up huge intergenerational strife and huge political discontent. It’s storing up a fiscal problem, too. A big cohort will have to fall back on to the state. It’s also a bigger economic problem. It’s at the core of the UK’s productivity crisis – people are living further and further away from where they’re working and are spending more and more time travelling. That’s bad for the environment. It’s bad for mental health. It’s bad for family relationships. Everything points to the need to build more homes in order to gradually bring prices more in line with earnings. We need to make housing, whether to buy or to rent, more affordable and to make social housing more available.

And it’s not like there isn’t enough space for new houses. People say Britain is full – that’s complete nonsense. Only 1.1 per cent of England’s land is used for residential housing, including gardens. There’s an awful lot of space if we want to use it. What there is a shortage of is land with planning permission in the hands of people who are prepared to build straight away.

There’s a lot of land. And there’s even quite a lot of land now with planning permission. But those planning permissions are held by big builders and land agents who sit on them because they are an appreciating asset. By helping to bring about the shortage of housing, they make their holdings more valuable.

spiked: What has happened to the quality of housing?

Halligan: Because the price of land with planning permission is so high, when developers buy land, there is very little money left to build the actual house. So the houses we’re building are very small – we’re building houses with the smallest living rooms since the 1920s. Bedrooms are getting much smaller, too.

And the quality of the homes we’re building is very low. New homes are often quite flimsy, and are too often put up without sufficient fire-safety facilities. I’ve seen lots of homes that have been built by leading builders that are simply substandard. I did a documentary for Channel 4’s Dispatches last summer and we found houses built by Persimmon, in this case, which were absolutely shocking. Persimmon says it is working to put that right. But if you look on social media, Persimmon are still pretty much the most complained about developer in terms of the quality of new-build homes.

Even though land is very expensive, the profit margins in housebuilding are absolutely huge because houses are being put up quickly, using low-quality materials. This is because there’s not enough competition. There are very few small builders compared to 20 years ago – certainly compared to before the financial crisis, which wiped lots of them out. We need to shake up the housebuilding industry. We need a Competition Commission inquiry because it seems to me there is very, very strong evidence that the market isn’t functioning.

spiked: Why has change been so slow?

Halligan: The main barrier is that there are very, very big vested interests to tackle. In my book Home Truths, I talk about an iron triangle of vested interests. One side of the triangle is existing homeowners who vote, who don’t want more houses to be built next to them – the so-called NIMBYs. Another side of the triangle is the housebuilding industry itself – the big housebuilders and the land agents. They are very, very powerful. They give an awful lot of money in campaign donations to the Tories in particular. And then you have the third side of the triangle, which are the banks. The banks are up to their necks in property loans. About 70 per cent of all bank loans in this country are linked to property. Banks want the value of the underlying assets that their loans are linked to to keep rising, to make their balance sheets look stronger. So they have got no incentive to lend to small builders to build more homes.

Government ministers, instead of tackling the supply side of the problem, tend to fall back on quick, headline-grabbing, demand-side fixes like Help to Buy. But all Help to Buy has done is throw petrol on to the fire. It has jacked up demand for housing even more by giving young, aspiring homeowners a state loan. It has given them more spending power, which means the prices go up when we are faced with a fixed supply.

In fact, the big housebuilders are building far fewer homes since Help to Buy came in. But their profit margins for some firms are two or three times higher because Help to Buy has just fuelled demand and led to lots of captive buyers. If you use Help to Buy you can only buy a new-build home, which means a lot of these big housebuilders see the young homebuyers coming. These buyers often need to buy a house quickly. Maybe they have got a family coming or they desperately want one. And I’ve seen a lot of these people be abused and rushed into housing that’s unfinished – all in order that these companies can hit their sales targets and the executives can get big bonuses. This is not how capitalism should work. This is not a functioning, competitive market.

The central idea in my book Home Truths is that when landowners and land agents get planning permission for land they own, and the value of the land goes up, I think that planning uplift should be split between the owner of the land and the state. And then this state share should go straight into infrastructure spending for the local area to make homebuilding popular, to get new schools and hospitals, new roads and new rail links. That will help to slow down the growth in land prices, which will help house prices gradually adjust so that they are more in line with earnings.

spiked: Is there a role for the state in building houses, in particular social housing?

Halligan: There is definitely a role for the state in making sure that the market works. That sounds like a paradox, but it isn’t. You need competition law and antitrust measures from time to time to make capitalist systems work. It’s an act of neglect to just leave everything alone. That’s not capitalism. You have to regulate properly, but in a way that allows enterprise rather than constricts enterprise.

In terms of social housing, Home Truths also calls for a big increase in social housebuilding. There will always be a need for subsidised rented accommodation for people whose wages aren’t high enough to pay market rents, especially in certain parts of the country where we need them to live to make the economy work – or for people in a vulnerable household. We haven’t got nearly enough social housing in this country and we need to build a lot more.

Liam Halligan was talking to Fraser Myers.

Listen to Liam Halligan discuss the housing crisis and the need for a clean Brexit on The Brendan O’Neill Show.

To enquire about republishing spiked’s content, a right to reply or to request a correction, please contact the managing editor, Viv Regan.

Comments

Jonathan Hearn

26th January 2020 at 11:00 pm

You cannot ignore the fact 90% of all new UK households are immigrant headed. Our housing problem is almost entirely driven by mass immigration and is a demand side problem. That is the reality. Building without supportive infrastructure is wrecking quality of life

R E

26th January 2020 at 6:28 pm

Coronavirus may solve the housing crisis.

Jack Enright

26th January 2020 at 5:46 pm

This article is in complete denial of a fundamental truth; that the building, buying and selling of houses is a market – and, just like every other market, it’s subject to the laws of supply and demand.
Exact figures are hard to come by – but a rough estimate is that, over the last 20 years, we have had NET immigration of about 10 million people; add in the effects of those immigrants having children; then add in the effect that many of those immigrants have more children than most native Brits, and the end result is that the numbers we need homes for is even more than that face value number of 10 million.
So why is Mr Halligan (or anyone else) so surprised that house prices have gone through the roof?
And please note the way he totally ignores the hefty increase in requirements for both land and money to provide the essential buildings and roads – as well as the extra staff required in services such as education and public health – to match the significantly increased load on them.
Take Halligan’s argument to it’s logical conclusion, turn the whole bloody country into a giant housing estate, and we could probably provide enough houses to take 500 million people – but who in their right mind would want to live here?

a watson

27th January 2020 at 9:47 am

The housing market is an international one. Besides your argument regarding immigration the desirability of international investment to finance property anonymously in British cities such as London has increased as house prices have rocketed. Labour councils such as those in London have been eagerly facilitating this rather than providing homes for their constituents. Has this led to an undermining and corruption of Local Government in cities such as London? I think so and that has spread to a corruption in our national parliament. It appears that the establishment are desperate not to discuss this – especially the London Labour party.

Jonathan Yonge

26th January 2020 at 3:17 pm

“people are living further and further away from where they’re working and are spending more and more time travelling”

Why doesn’t Halligan explain this ?
The answer in 2 words is stamp duty.

Jonathan Yonge

26th January 2020 at 3:15 pm

“New homes are often quite flimsy, and are too often put up without sufficient fire-safety facilities.”
Absolutely untrue. Fire safety and environmental standards have risen and all buildings must pass stringent planning as well as independent on-site inspection throughput the build. We spend a huge amount on maintinging these standards.
For example, from 2010 onwards every pane of window glass replaced must pass thermal insulation standards and certified in the FENSA database. Ditto heating systems.

Jonathan Yonge

26th January 2020 at 3:06 pm

Point of information:
“you end up paying a lot more each month in rent than you would if you were paying off a mortgage.” – This is not true. If it were true then the return on buy-to-let should be rising, but it isn’t. It has fallen steadily and is less than return on equity. Buy-to-letters are selling up, why ?

“…gives you options to move throughout your life…You have none of those options if you rent.”
If you have a house you are shackled to it by the stamp duty and cost of selling & buying required for a move. If you rent you can move at one month notice. If you rent your house out instead the agent takes 15%.

If you own a house you also own the costs of upkeep, repairs, plumbing, carpets, decoration and all garden and boundary work except grass cutting. You also have t deal with city councils who a heavily biased against landlords in favour of tenants.

Mark Bretherton

27th January 2020 at 12:55 pm

JONATHAN YONGE
““you end up paying a lot more each month in rent than you would if you were paying off a mortgage.” – This is not true. If it were true then the return on buy-to-let should be rising, but it isn’t. It has fallen steadily and is less than return on equity. Buy-to-letters are selling up, why ?”
In a word, Tax.
First Osborne, then Spreadsheet Phill removed the ability for landlord’s to off-set the cost of their BTL mortgage against their rental income, at a stroke pushing many into the higher tax bracket with no corresponding rise in income.
Then there is the second home stamp duty surcharge – an additional 3% on top of the usual stamp duty.

ZENOBIA PALMYRA

25th January 2020 at 8:56 am

The English just can’t get anything right, can they? Housebuilding, hospitals, infrastructure projects, etc. Where is their boasted superiority? Why can the Scandinavians get these things right while you can’t?

Brexit Bear

25th January 2020 at 5:14 pm

Low quality trolling effort.

ZENOBIA PALMYRA

25th January 2020 at 11:21 pm

But the truth hurts, doesn’t it? I mean, look at the successes of Norway FFS.

Cedar Grove

26th January 2020 at 7:09 pm

You never seem to include yourself in “us”.

Aren’t the problems of this country as much yours to solve as anyone else’s? Or do you prefer the role of jeering parasite, refusing to help to keep the body politic alive?

Your relentless, sneering negativity is really tedious.

Jonathan Yonge

26th January 2020 at 8:51 pm

Oh right yes look at the stratspheric Swedish property market and clogged rental market due to rent controls.
You seem like somebody who thinks people don’t check facts.

.. oh , and Sweden has minute population density compared to the UK

Jim Lawrie

24th January 2020 at 10:35 pm

No mention of the depressing effect on new builds of the social housing requirement, and Government clams for its success that are just plain lies.
People do not want to live in or next to council housing. Calling it social housing does not change what it is, and is an insult, given the anti-social behaviour that comes with it. Changing the name from Windscale to Sellafield did not create a rush of people wanting to live, and die, there.

I have never met anyone brought up in council housing who wanted to live there now. Unlike its great advocates and architects.

People do not want to live next to schools, such is the behaviour of pupils and parents.

Vast numbers of people have moved out of town and far from work in a process called white flight. They do it for the love of their families.

K Tojo

25th January 2020 at 11:11 am

Ordinary private housing is now taking on the character of so-called social housing following the massive growth of the buy-to-let market.

Difficult to get away from the anti-social mob when you have money-grubbing landlords only too ready to house anti-social tenants next door to you. If you complain about bad behaviour such as noise, litter, problem dogs etc you may find yourself accused of harassment – I speak from experience!

Jim Lawrie

25th January 2020 at 12:59 pm

I witnessed that on a grand scale on a 900 dwelling development in South London that became almost exclusively buy to let when the market hit the skids in 2009. A nightmare for those living there. People took to poisoning the dogs.
The main point of my post was to highlight that the entire interview is sterile of the experience of those, like you, who live in these places. It is no different from 70 years ago when housing was decided from on high. There is no suggestion of people being involved in the layout, governance and management of where they live and who lives there, but “There is definitely a role for the state.” I wonder did Mr Halligan ever visit the state housing in Moscow in his years there.

If you can, 2 of the best people to talk to before you make a move are the postman and the doctor’s receptionist. They know the area address by address, scumbag by scumbag.

Jim Lawrie

24th January 2020 at 9:48 pm

– 1.1 per cent of land including gardens – But not including streets, pavements,shops, schools, etc … The percentage rises again when you exclude land that cannot be built on. Ben Nevis for instance. The White Cliffs of Dover. The Norfolk Broads.

There has not been enough new housing to keep up with mass immigration. There never will be. And most of us do not want there to be.

ZENOBIA PALMYRA

24th January 2020 at 10:26 pm

Jim, do you do anything other than comment on this site? I’m worried about you.

Jim Lawrie

26th January 2020 at 11:19 am

What does that say about you who stalks me and many others on here?

You’re not worried. Just a pretext for calling your opponents mentally ill, because that is all you have.

brent mckeon

26th January 2020 at 1:21 pm

How will your comment help the housing crisis?

reality lite

24th January 2020 at 8:24 pm

” But those planning permissions are held by big builders and land agents who sit on them because they are an appreciating asset.”

This is utter bollocks & obviously so, if you think about it. If you’re in the business of building/developing houses you need to buy land do so. Regard it as part of the raw materials. The profit is made when you sell the houses. It’s in your interest to sell the houses as quickly as you can from when you paid for the raw materials. Builders don’t keep stocks of bricks, why land? The amount of land in your possession at any one time would be the same whatever your rate of build. So it’s going to make damn all difference to the amount of price appreciation you’d benefit from.
Why builders/developers hold land over long periods is because it takes so long in the planning permission process. Speed that up & you’ll get houses built at a faster rate because builders/developers want to make more money

Matt Ryan

24th January 2020 at 8:43 pm

Looks like we build around 184,000 homes per annum (from https://fullfact.org/economy/house-building-england/). So current land banks of 800,000 / 184,000 is ~ 4.34 years or presumably the time taken to go from field to executive slave box estate.

Dominic Straiton

24th January 2020 at 6:01 pm

If the banks had been allowed to fail in 2008 with mass arrests we wouldnt have had trillions of printed money injected to feed the greatest bubble in assets ever. We have lived through a vile time not of capitalism but crony capitalism. Building our way out of it will never work.

Filbert Flange

25th January 2020 at 4:52 pm

This fella gets it, most urinalists do not, quite by design.

The “great financial crisis” of 2007-8 was in fact a great financial coup. The final and complete capture of western governments by a cabal of corrupt corporatists bent on wringing every last penny out of their ponzi scheme. It was begun under Nixon when the crony crooks started their criminal enterprise and it finally got its dirty mitts on sovereign wealth 12 years ago the way all gangsters do it: “Nice country you got there. Shame if something nasty were to happen to it”.

And they proceeded to inflate their riches by inflating real estate bubbles to pad their shot to buggered ledgers. Mark Carney was and still is one of the most active in this foul endeavour. Now he’s hawking global warming. No surprises there eh?

Filbert Flange

25th January 2020 at 5:00 pm

Guess who is buying up all this massively over priced real estate? Halligan won’t tell you because he works for one of them: asset management firms like BlackRock et al. Massively leveraged and factually bankrupt criminal enterprises who have unfettered access to mind numbing amounts of worthless debt, backed by taxpayers!

Ven Oods

24th January 2020 at 4:34 pm

“And the quality of the homes we’re building is very low.”

I’ve long thought that the problem with playing catch-up with the dearth of house building would be the low quality of the houses produced by the speedy building process that’s required. Even going back several decades, when the problem wasn’t so pronounced, many folk who bought new houses protected by the NHBC scheme found that it was pretty toothless when it came to sorting out fairly blatant examples of poor practice.
Expect much more of the same and even less protection once the new accelerated building project starts.

ZENOBIA PALMYRA

24th January 2020 at 10:29 pm

Persimmon Homes should stop building with papier mâché and balsa wood.

Jonathan Yonge

26th January 2020 at 8:52 pm

.. and you should be prevented from posting bilge on here.
Please state your facts

Filbert Flange

26th January 2020 at 9:32 pm

I have no truck with the entity you take issue with, but with all due respect… If you truly mean what you say above then you have completely missed the point of this place. Everybody has a right to say what they wish and you have the right to disregard it. QED.

I think you owe somebody an apology, at the very least, for presuming to possess such censorious authority — even if his/ her words are absurd or incendiary, most of the time.

I shall fight to the death to defend his/ her right to make a fool of him/ her/ itself.

Mark S

24th January 2020 at 4:18 pm

There is no such thing as a, “Housing Crisis.” What we have is an MASS IMMIGRATION CRISIS. Some half a million people each year keep entering the UK. This is a human ponzi scheme which, if it was not government sanctioned, would be made illegal. But when since has government stood in the way of a) a bit of social engineering (New Labour) and, b) a fast buck for their friends and donors (Tories) ?

Michael Wilson

24th January 2020 at 7:50 pm

You have hit the nail on the head – immigration will mean that we are in a constant battle to build enough homes – as we build, demand is simply topped up and the “crisis” continues . .

The reasons you suggest are exactly right – it is very rare to hear a politician of any stripe acknowledge this aspect of the problem, indeed to my knowledge only Peter Whittle of UKIP has actively suggested dealing with one of the route causes rather than just the symptoms.
. .
Needless to say Whittle was promptly accused of “Racism” in response . .

ZENOBIA PALMYRA

24th January 2020 at 10:30 pm

Yeah, let’s get rid of those stupid NHS workers…

brent mckeon

26th January 2020 at 1:20 pm

Zenobia you make an important point but you don’t realise it. Britain ‘imports’ thousands’ of skilled medical people every year for free mainly from 2/3rd world countries. These countries spend millions training their medical people for the much vaunted NHS to steal them for free. The 2/3rd world countries can ill afford to lose their scarce qualified people to colonist Britain. Let there be free access worldwide but 1st world countries should pay for poaching trained people for no pay from the 2/3 rd world.

Steve Roberts

24th January 2020 at 4:14 pm

Halligan is an intelligent, informed and eloquent speaker his recent podcast with BON was very good although i didn’t agree with everything he had to say.
On housing he makes a huge amount of relevant points but i would to some extent question that all young people are such a long way from getting on the rung of the ladder, in many areas of the country they are undoubtedly making a lifestyle choice instead, that does not diminish the entirety of what is clearly a massive shortage of what is after all a basic human need of a roof over ones head, yes 2020 and no shelter for all, outrageous.
He also make a point about renting and mortgages, this needs further examination, some economies are structured differently where renting is the norm and relatively successful, we need a more balanced deeper look at this.
Indeed what he misses in this whole issue for the UK is the political cowardice of the entire political class regards mortgages and assets, undoubtedly if there was to be a mass building programme then the entire housing market would be massively effected.
Values of assets (houses)some paid for over decades and intergenerationally at huge expense and commitment to life choices and responsibilities could be wiped out very quickly, prices would plummet, negative equity could become common, lives turned upside down or very much changed.
It will take a serious amount of brave political will to instigate a necessary programme of this kind with possible consequences for many, of course if it were to be part of a truly new transformative social and economic progressive project for the entirety of society it could garner wider support as a necessary short/medium term requirement.
Where is that sort of political leadership and vision going to come from, not the tinkering at the extreme edges we have had for generations from the political class that’s for sure.

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24th January 2020 at 4:10 pm

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ZENOBIA PALMYRA

24th January 2020 at 10:27 pm

How will that help the housing crisis?

NEIL DATSON

24th January 2020 at 3:08 pm

There is surely a great deal wrong with the land and housing market in this country and ultimately it would be healthier were there not such a national obsession with property ownership. Unfortunately governments tend to see the possibility of a modestly declining – or even a stable – property market as electoral suicide. Possibly what we need is a stronger private rented sector supported by corporate, large-scale, long-term, capital, that could make it easier for the young and mobile to move and progress their lives and careers.

On a point of information, a ‘land agent’ is a professional who advises and acts for landowners, agricultural tenants and others rather than, as implied, the beneficial owner of the land. In the context his or her role is akin to an auctioneer’s (and indeed, many also auction land, buildings, livestock, agricultural equipment, furniture and goods of all sorts.)

There seems

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