Solving the housing crisis will require government to re-enter the market as funders or even house-builders.
The UK’s housing crisis is fuelled by a simple imbalance of supply and demand – more people want to buy or rent a home than the number of homes available. As a result house and rental prices far outstrip wage growth. Although traditionally house price rises were trumpeted as a ‘win’ for owners, there is now growing recognition across the political spectrum that the unaffordability of homes is threatening quality of life, business growth, the sustainability of the welfare bill, and the performance of the national economy.
As a result, we have seen all the major parties in the run up to the General Election trumpet their commitment to building more homes:
It is great to see all the parties setting out their respective housing policies, but some critical omissions remain. Primarily, many of the proposals – such as the Tories’ Help to Buy and Starter Homes or Labour’s plans for rental security – focus on the demand side of the housing market, and not on increasing supply, which is essential to reducing the cost of housing. The supply targets we have seen so far have been too abstract, and small-scale to address the size of the challenge. All in all, a consensus that something must be done still leaves us a long way from a coordinated strategy that addresses where to build new housing, on what land, and how best to pay for them.
UK house prices are highest in and around economically successful cities. As the demand from businesses and workers to cluster around their opportunities grows, and housing supply becomes scarce, cities such as Oxford, London and Cambridge have become progressively less affordable places to live – even with some of the highest wages in the country. This is placing a strain on both firms and people, and threatening their future growth and their competitiveness as places to attract workers and do business. By comparison, other cities such as Blackpool, Wakefield and Bradford are struggling with stagnant and falling house prices resulting from a lack of demand.
The variability of the housing crisis requires a similarly varied response. In particular, priority must be given to addressing the lack of homes in those places whose productivity and growth is most critical to the national economy – through building more homes closest to the jobs and opportunities of our high-demand cities.
This will require a balanced approach to finding more land:
To increase the amount of land available for housing, the government could capitalise on preferential borrowing rates and re-enter the housing market as funders or even house-builders. Government and local authorities could build hundreds of thousands of new homes on new or existing public land; servicing the costs through rental income or sales revenue, while providing the housing our most productive cities need to grow.
The good news is that the parties have acknowledged the need to build more homes to address this unprecedented housing crisis. The bad news is that we are still a long way from having a fully formed housing strategy from any of the parties, which will deliver the housing the UK needs, when and where it is most needed.
Read our Manifesto for more ideas on what the Parties should do to build a stronger urban economy.
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Robin Spragg
‘Building more houses’ in ‘successful’ cities is not practical, otherwise it would have happened to tap the demand.
A better solution would be to reduce unaffordability by diverting the maximum number of jobs to the very affordable cities, thus providing the income to enable housing demand to increase. This is also in line with reducing the north-south divide and increasing equality. This policy used to be applied in the period when new towns were being built, but doesn’t happen now. Of course, it is not in line with free market theories, but you can’t have it both ways!
mike reardon
isn’t this just a function of an imbalanced economy and the over heating of the south east. So the housing debate like so many others (yawn..) is what I call an Evening Standard debate.those who read that paper think it is vital, those of us who I’ve elsewhere have different issues. Like e.g. collapsed housing markets with no demand, lack of supply , especially social housing but with no necessary link to affordability per se (that is to say scarcity is not in itself pushing up prices), bedroom tax a key issue as more people in social housing than many parts of the south east……The measures we see announced and proposed are all abut ‘fixing’ the south east not fixing the UK….twas ever thus…
Edward Clarke
Hi Mike thanks for commenting. I completely agree that the housing crisis does not look the same across the country, one of our key points. In many areas house building is being incentivised despite not being a local priority due to national policies.
For example Burnley must build new homes to get central government grants (through the new homes bonus) at the cost of other local priorities (e.g. skills) despite housing being relatively affordable there. In and around the most successful cities housing is a serious issue and by not building there we are constraining not only these cities’ economies but the national economy.
Housing policies must reflect this differing geography but this is being missed ahead of the General Election.