“A house is not a home”, as Hal David put it, “it is the point at which the demand-side factors of interest rates, number of households, availability of mortgages, economic growth, affordability of housing and speculative demand intersects with the supply-side factors of new builds and numbers selling, dictating the ability to meet market demand”.
Actually, I think he may not have written the second bit of that, because it doesn’t scan very well and sounds a bit more like the sort of thing churned out by economists, rather than Burt Bacharach’s lyricists.
It is, however, the definition that fits the current state of affairs in the UK. The fact that housing is seen, above all, as an asset, rather than something – like a car, nice furniture, or a collection of Dresden figurines – that, while it may have value, is mainly judged on its usefulness or desirability, is one of our major problems. It may be the most important problem, because the distortions of the property market are entirely responsible for, or a significant factor in, every other issue of policy, from wages to immigration, transport to education, and health to productivity.
It’s only a little more than a decade since distortions in the US housing market crashed the entire global economy, and yet we seem to be back where we were. In that time, house prices in some parts of this country – notably London and the South East, but also in Cambridge, York, Edinburgh and Aberdeen – have skyrocketed. And it is not confined to cities: the ability of those who already own property to pick up second homes, and the recent, pandemic-inspired move out of towns has tended to price those in rural communities out of their own districts.
This gives the lie to the idea promoted by some economists (notably Ian Mulheirn of Tony Blair’s Institute for Global Change) that the principal problem with the housing market is availability of credit rather than the lack of supply in the areas where people actually need to live and work, or – like the seaside or attractive bits of the countryside – that they find especially desirable.
Mr Mulheirn has some interesting ideas, and there’s no doubt something in them, but the fundamental problem is obviously a shortage of housing in those areas. His notion that lack of supply is only about 15 per cent of the problem doesn’t correspond with reality. Otherwise, it’s impossible to account for the fact that over the past decade or so, the average price of property in Cambridge has risen by 76 per cent, while in Burnley, it’s gone up two per cent. That couldn’t have happened if it were just down to credit.
Unfortunately, to judge by Boris Johnson’s conference speech and recent remarks by Michael Gove, now the housing minister, the government seems to have given up on its previous ambitions radically to reform the planning system, and settled back into its default Nimbyism.
One can see why this appeals to Tory voters, if they own their own houses in leafy suburbs, along with a cottage in the country and a couple of rental properties that are paying for their retirement. But almost certainly, most of that accumulation of capital will have been acquired through having got in on, and lived through, a rising property market in the first place. The UK’s average house price in the 1960s was £2,500 (about £55,000 in today’s money); it is now more than £250,000. In some parts of London, for example, property that would have sold for around £100,000 as recently as the mid-1990s is now worth almost a million pounds.
So it is perhaps not surprising that those already on the property ladder would like to protect the value of their investment. But there must also be a lot of those people who are concerned that their children or grandchildren stand no chance of being able to buy a house of their own. The Conservative Party, of all political organisations, should be acutely aware of the benefits (not least, to themselves and their electoral fortunes) of improving people’s chances to own property. The huge increase in home ownership in the 1980s was, in large measure, responsible for the party’s electoral dominance for almost 20 years.
Yet if you think about it, a house (or flat, or whatever), while it will be for most people the single biggest purchase they ever make, isn’t terribly sensible if it’s viewed primarily as an investment. If investing in the hope of a return you would normally attempt not to put all your eggs in one basket. You would go for what people who know about stocks and shares call a diversified portfolio. The fact that, in many parts of Britain, the nominal price of the house you live in has increased ten times more than the FTSE is evidence enough of market failure.
The usual estimate is that the UK needs to build 350,000 new homes every year for the next decade in order to get the minimal housing stock required. That’s not something government should do, even if it could. But easing planning restrictions would be the quickest and most productive way of ensuring that the market responded. And it needn’t mean abandoning green spaces, or amenities; in London alone, almost 20,000 hectares of Green Belt designated land is patchy ground near railway stations – in other words, exactly where lots of people want to live.
In fact, most of the UK is very undensely built up. In Scotland, population density is 70 people per square kilometre, though the figure for where people actually live – “lived density” – is nearer 200. But in the Netherlands it’s about 550.
Golf courses occupy almost as much land as housing; peat bog takes up seven times more space than every building in the UK put together; “continuous urban fabric” is 0.1 per cent of all land use and all building accounts for about one per cent; total urban area, including the Green Belt bits inside them (which is about 22 per cent of Greater London, for example) amount to about five per cent.
If the Tories want to “level up”, or get anyone currently under 40 to vote for them in the future, they need to start a bonfire of planning regulations now. But unfortunately, it looks like they won’t.
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