Britain is in the midst of a housing crisis. For many people, soaring house prices mean that the notion of owning their own home is not a realistic prospect.
Decades of failed housing policies mean we are currently building around 100,000 fewer homes than required to keep pace with demand each year. Our latest report, Cities Outlook 2013, sponsored by the Local Government Association, shows that only by putting place back into housing policy can we provide a much needed boost to the UK economy, and take a big step towards resolving this crisis over the long term.
Although the UK as a whole needs more housing, this does not play out uniformly across the country. Economically successful cities, where demand for housing is high, urgently need new homes; they are the most unaffordable places to buy in the country. Failure to ensure that the supply of new housing keeps pace with demand in cities like Cambridge, Brighton and Reading risks damaging their local economies. If residents cannot access housing, and if new people are not able to move and work in these cities, then employers struggle to recruit and businesses struggle to grow. In these places, policy must focus on increasing the supply of new homes.
By contrast, in cities such as Burnley and Bradford, housing is more affordable but the number of existing homes that are standing empty is relatively high. In these places, where demand for housing is relatively low, incentivising new development will be more expensive and difficult, and ultimately is unlikely to help the local economy. Instead policy should empower these cities to focus on dealing with high vacancy levels and improving the quality of existing houses, so as to improve the quality of life of local residents, and help make areas more attractive to businesses.
Our analysis shows that, in the short term, the biggest opportunity to boost housing supply is by ensuring initiatives designed to kick-start stalled housing schemes, such as Get Britain Building, are explicitly targeted at those cities where economic growth is strong, demand for housing is high, and affordability is constrained. The scope to increase development via this route is potentially significant: of the 400,000 units on stalled sites across England, over 118,000 of these are in our ten most unaffordable cities.
If successful, such an approach would also provide a significant short term boost to the national economy. Research suggests that delivering an additional 100,000 homes in the year ahead would support the employment of up to 150,000 people, including up to 90,000 low skilled positions, as well as providing a 1% boost to the national economy.
Cities Outlook clearly demonstrates the importance of putting place at the heart of housing policy, empowering cities to respond to their local economic circumstances. It will take time to reverse decades of failed housing policy, and other, more significant reforms are required to ensure cities can fully respond to their local housing needs. But, in the short term, Government should work with cities where demand is high and affordability is constrained to help them get development moving. Taking a cities-based approach will get us on the right track to resolving the housing crisis, and help kick-start our national economy.
* Ben Harrison is Director of Partnerships at Centre for Cities.
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14 Comments
I’m glad to see you write about this most important issue, but I fear that kick-starting stalled housing schemes will barely scratch the surface. The 400,000 units on stalled sites across England represent something like two years worth of short-fall in the supply of new housing in the UK. We need to increase housebuilding by at least 100,000 just to meet existing demand.
I’m not saying that kick-starting stalled housing schemes won’t help, but we need a longer term solution that leads to a permanent change in our ability to ensure that new housing supply meets demand. At the root of this problem is the planning system, and until it is substantially deregulated I cannot see any change to the 30 year pattern of rising housing inaffordability.
This is a deceptive article – the author, Mr Harrison, talks about the cost of housing, the demand for housing, affordable housing, the housing supply, and units on stalled sites. But only in the opening paragraph does he make an explicit reference to one type of housing when he says, “….soaring house prices mean that the notion of owning their own home is not a realistic prospect.”
Ah, houses built for sale on the market. Are we then to assume that this is the only kind of housing that his article is meant to deal with? – because the imperatives behind building houses for the market and building houses for rent are quite different. It would have been useful if Mr H had made the distinction perfectly clear and explained why the crisis in the lack of rented housing is apparently of low significance.
“Decades of failed housing policies”? What housing policies?
Much as I sympathise with the CPRE, National Trust etc, we must accept that there have to be lots of developments on greenfield sites and we must stop cramming in far too many dwellings to the acre.
Failure to ensure that the supply of new housing keeps pace with demand in cities like Cambridge, Brighton and Reading risks damaging their local economies. If residents cannot access housing, and if new people are not able to move and work in these cities, then employers struggle to recruit and businesses struggle to grow. In these places, policy must focus on increasing the supply of new homes.
Yes, and just WHERE are you going to put the new homes in Brighton? I was brought up in Brighton, back in those days they were still expanding new housing into the downland valleys, but now the South Downs are officially a National Park. The Brighton conurbation is bounded completely by the sea to the south and the National Park to the north. I think you will find also that the people of Burgess Hill and Haywards Heath immediately to the north of the Downs are not keen on the idea that has been floated of turning mid-Sussex into one big urban conurbation to take the Brighton overflow.
The reality is that if we do not want to keep on expanding housing forever we HAVE to make it financially not a good idea to hold onto more of it than you need. So long as housing is seen as an “investment” with people hanging on to it because they make more money that way than investing it in almost anything else, we will NEVER meet the “demand” for it, and it is vain to try and do so by building and building.
I appreciate very much how difficult this message is to sell, with the usual tears wept over the little old lady in the big house and the false but common belief that inheritance tax is “double taxation”, but we need to be stark about it: if it isn’t done, the answer is concrete over some of our nicest pieces of countryside, or reduce the surplus population by measures which aren’t very liberal.
Isn’t this a rather confused approach?
We are asked to provide substantial subsidies to rich cities like Cambridge, because their housing shortage is preventing them from getting even richer! In the process, are we also asked to ignore the loss of market value that new houses there may cause to existing properties, and the consequent loss of collateral-based credit.?
By contrast we are asked to take rather indirect action in places like Burnley, which is presumably poorer. We are not asked to provide support for new business directly. We are asked instead to spend a few bob to make unused houses more usable if there were only users to use them!
Shouldn’t things be another way around?
Governments like housing because our economy is driven by personal debt, It’s a short term approach that carries dangers as illustrated in Ireland and Spain. Plus seeing as the present economic problems were caused by an over reliance on borrowing how does setting up the groundwork for another bubble help? Where the are genuine housing shortages I’m with Vince Cable. He recommends council housing as a solution.
If housing wasn’t over-priced people could afford to buy without incurring ridiculous levels of debt. Prior to the crunch it was over-priced because banks were prepared to lend stupid multiples of earnings and because there was a shortage of housing in the places people wanted to live / needed to live for work reasons.
The shortage is still there. And now banks are nervous about lending to almost everyone. House prices are still high partly because those who can afford to buy can let to tenants at ever-increasing rents.
If rent control – at a level still high enough to attract landlords – were phased in, houses might gradually become more affordable. That and building more. Oh and putting a rocket under the banks.
I totally agree with Matthew Huntbach re – his 3.50pm comment. This paragraph in particular.
“The reality is that if we do not want to keep on expanding housing forever we HAVE to make it financially not a good idea to hold onto more of it than you need. So long as housing is seen as an “investment” with people hanging on to it because they make more money that way than investing it in almost anything else, we will NEVER meet the “demand” for it, and it is vain to try and do so by building and building.”
I would just like to add one layer of thought to Matthews comment, if I may?
I speak as a boomer, but have noticed that some ‘fellow’, boomers with cash looking for investment are effectively, ‘pricing out’ the young, and buying up those ‘affordable homes’. Subsequently, they are installing those same young individuals or families, who are then paying rent, which the boomers consider to be an income stream to their retirement earnings. None of this is illegal or underhand, but I think it’s worth looking at this in more detail.
It seems to me that we boomers are, in subtle, and not so subtle ( £9000/yr student fees? ), ways, making it harder for the young to find their feet and build a family life in the way that we did. In its crudest form, we ‘boomers’, appear to be devising ever more pernicious ways, to ‘eat the young’.
My observations are purely anecdotal, but I believe the ramifications, if correct, will create a form of intergenerational war, in the not too distant future.( It might even have begun ~ http://www.if.org.uk/ ). If I’m correct, we need a radical, and urgent, re-think. We boomers, are going to have to face some very uncomfortable reality checks, but for sure, we cannot continue to view our national housing stock, and our young, as a pension plan.
John Dunn
I speak as a boomer, but have noticed that some ‘fellow’, boomers with cash looking for investment are effectively, ‘pricing out’ the young, and buying up those ‘affordable homes’. Subsequently, they are installing those same young individuals or families, who are then paying rent, which the boomers consider to be an income stream to their retirement earnings
Indeed. In south-east London where I live, you can watch the new blocks of flats going up, the “For Sale” signs one month, the “To Let” signs the next. Back when the boomers were young, if you were starting a family you would be able to get council housing, those that did may have benefitted greatly from being able to buy it up cheap and sell it on, but for the next generation that option has gone, you have to have a seriously abnormal level of deprivation and social problems to stand a chance of getting the few council house allocations still coming up.So people are forced into private renting, rents several times higher than cost-only council housing, with the difference often paid for out of housing benefit.
This is our crazy economy, too many people thinking money is made just by owning things, you can sit back and watch it roll in, someone somewhere else is doing the work. THAT is the real legacy of Margaret Thatcher, she encouraged all that with her “right-to-buy” of council houses and “Tell Sid” privatisation, while letting real industry and the work ethic it encouraged crumble. THAT is why we are now seeing an economy which just can’t pull itself back to recover. So much of the supposed boom of the post-1979 era was just Ponzi economics, money being pushed around and making people feel richer while no-one did any real work, people putting money into housing on the assumption others would put more in later, and that was where the profits came from. Like all Ponzi schemes it was bound to crash one day.
Matthew H.. so right.!.. in both posts, but going back to the Brighton impasse, I wonder how many vacant homes there are, empty spaces above shops, vacant old style commercial.. etc. These would come flooding back into use if only Vince and Danny would make a few tax changes: a) give the Council control of Council Tax and Business Rates; b) remove VAT from refurbishment/conversion costs: c) raise stamp duty thresholds; d) charge in full Tax/Rates on all vacant property; and no tax loophole either for property left vacant; e) empower the council to compulsorily purchase vacant property, and provide the funds to do so.
Thanks for all of your comments so far. I’ll try and respond in the context of the work we have done at the Centre.
Our most recent work has primarily focussed on the issue of home ownership, which is not to underestimate the role that homes for rent currently play, and will continue to play, in the UK housing market. Our report does touch upon the relationship between supply and rental levels though, and also talks about the importance of reconfiguring existing stock, refurbishment and retrofit, as well as new supply.
The arguments as to why the UK needs more houses are well rehearsed. The average price of a home now stands at just under nine times the average yearly salary. Given we are building far fewer homes per year than required, the affordability issue around housing (both in terms of buying a home, and renting a home) is likely only to get worse – irrespective of whether our cultural relationship with home ownership changes radically in the future. Secondly, building houses would likely act as an immediate pick-me-up for the national economy, as I describe above.
But we must recognise that demand, and linked to this, affordability, varies significantly between cities. It will be much more helpful to people living in cities like Burnley, where the market is weaker, to provide support and investment to assist them in addressing vacancy rates and issues relating to the quality of existing stock, than to try and build yet more homes when the demand currently doesn’t exist. In the report we touch upon some of the recommendations that feature in the comments above to deal with this, including reductions to VAT levied on refurbishments. And of course, retrofitting and refurbishment programmes would stand to boost employment and in the longer term, making those cities more attractive to live and work in.
I agree that the broader issues facing the UK housing market go beyond simply building on stalled sites, which would provide a welcome short term boost, but would not be sufficient to ensure the numbers of new homes we need would be built over the coming decade. But empowering cities to respond to their local housing circumstances is the best place to start while we consider more fundamental reforms.
Matthew Huntbach/John Dunn. Absolutely right but the govt is heading in the wrong direction. Merryn Somerset-Webb, editor of Money Week, was on R4’s Moneybox about two weeks ago pointing out that, irrespective of what they SAY, govt policy is actually about keeping house prices as HIGH as possible – a conclusion I had already come to myself. The reason she gave was that they are terrified that any fall would make the banks insolvent (they already are but that’s another story). I suspect also that there is a policy dimension for Conservatives pandering to their base. Hence the cheap loans/loan guarantees the govt promotes.
And now they are proposing to make it worse by introducing a Community Infrastructure Levy (CIL) to be paid by anyone doing new property development. The details are complex but it will surely reduce (or alternatively make more expensive) the building of new houses.
It’s only human nature to wish to accumulate the maximum amount of assets but it’s a fallacy of composition to imagine that what’s good for the individual (and even that is debatable) is also good for society. It is terrible for society and has become a catastrophe for young adults. Thank you Thatcher and the neoliberals!!!
Where I live in Bath, the ideas on building are constantly quashed. It appears we do now have a probable strategy, but nothing seems to be able to agreed with the local councillors. Of course, things are difficult, but you simply can’t say I don’t want to consider the problems, people were elected to do just that, sorry but that comes with the job.
Green belt it may have to be considered, or I am told farm land is another option, perhaps more likeable.
Liberal Eye
Merryn Somerset-Webb, editor of Money Week, was on R4′s Moneybox about two weeks ago pointing out that, irrespective of what they SAY, govt policy is actually about keeping house prices as HIGH as possible.
Yes, and it is still the norm for the media to report house price rises as a good thing and falls as bad. Even the more leftish press elements do this.
It will not stop until those without homes or those paying huge amounts to buy homes get ANGRY about it. And not just angry, but willing and able to exert electoral pressure on this issue. Most of all they must reject this “housing ladder” idea, which is all about making people feel that paying absurdly high house prices is a good thing because somehow its an investment.
We’ve had mass protests about young people being forced into £27,000 debt to get a degree. So why is that so bad and the much higher extra debt they’re having to take on to buy a home not considered an issue? How much did the average first-time buyer home cost rise during the time of the last Labour government? Why no protests about that? Why no threats of “I’ll never vote Labour again” over it?