Last year I was probably the only MP to be elected while still living with my parents. Of course, I’d moved out of home and, like many others, had to move back again. It’s a symptom of the fact that housing policy in the UK is in crisis. We have millions of people languishing on social housing waiting lists, first-time-buyers priced out of the market and in private rented sector tenants facing increased rents with decreased security of tenure and standards.
Let’s be clear: Governments of all hues have failed on housing and, frankly, the Coalition has barely begun to acknowledge the extent of the problems facing Britain. Each year we have around 250,000 new households (people living together, or alone) created and yet we barely build enough new homes for half that number. Not only do we have a problem already (Shelter estimate we need over 3 million new homes by 2020) but that problem is getting worse year on year.
And it’s all been a relatively recent change. In 1990 over half of all homes in Britain were owned by people under 34. Now the average age of a first time buyer has risen to 37. We all know that wage inflation has fallen well short of house price inflation. Demand is up but supply is down and falling further. In 1968, almost half-a-million homes were built in Britain, by 2008 it was just 182,000 and 2010 saw the fewest homes built for almost a hundred years.
The fundamental problem: we don’t have enough homes and we need to build more. Of course, part of the solution is better management of our existing housing stock. Around 750,000 potential homes stand empty – half of those for more than 6 months. We need to bring them back into use. And we need to allow Local Authorities to limit the number of second homes in property hot-spots.
But that won’t go far enough. If the first duty of Government is to defend its citizens, the second should be to ensure that everyone can access decent and stable accommodation at a price they can afford.
As a Liberal, “localism” is in my DNA. The Localism Bill rightly puts communities in the driving seat for planning new developments. That comes with the potential for greater NIMBYism and we will have to face up to that. But the reality is that the top-down approach of the last 13 years has failed. We need to see a bottom-up approach that generates community consent. People are fed up of having things done to them – developers, planners and community leaders will need to work to convince people of the arguments for more housing. And MPs and Councillors will need to start to argue for the sort of development they want to see. In doing so we need to listen to the housing “have-nots” as much as we do to the housing “haves”.
In the Private Rented Sector, we need to look again at security of tenure. Many people who have rented in a metropolitan areas will be familiar with the annual move. If you pay your rent on time, then Government should consider the right to an automatic lease renewal. We can’t build a “big society” if almost a quarter of the population are in insecure accommodation and on the move each year – unable to develop links to their neighbourhoods.
Yes, Councils need to get back into the business of building homes. We need to free Housing Associations and other social housing providers from the red-tape that stifles their ability to build. But decision makers and representatives will have to change tack too: engage with the debate and argue for housing that meets the needs of their area.
There’s no panacea and there’s no quick fix. We will, of course, need a mix of tenures and types. We need to get the banks to revisit their lending policies. There’s a long way to go. But the longer we delay in facing up to this crisis the worse it will get.
At the moment, according to a recent YouGov poll, 71% think the Government is failing on housing policy and almost 20% think it’s the most important issue facing the country. I expect both numbers to rise before they get better.
If we continue to duck our responsibilities to get housing policy right then we will exacerbate an already emerging trend – the generational divide between the so-called “Baby Boomers” (those born after the Second World War) and their children, Generation-X.
Compared to their parents, the future for Generation-X looks increasingly challenging: they are going to have to work longer than their parents and can expect a diminished return from the State in later life whilst also being locked out of stable and affordable housing.
If this divide and these challenges are not going to get much worse before they get better the time for action is now.
Stephen Gilbert MP is Chair of the All Party Parliamentary Group on Housing.
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22 Comments
The fundamental problem is that all communities everywhere object to new housing being built because of fear of reducing the price of their own existing property, which they have been erroneously brainwashed into thinking of as an investment rather than a home. It is a cartel. Now of course there are lots of “have-nots”, but they are not the ones with the political voice, and as a result of Britain’s 25 year old home-ownership fetish the owner-occupiers are so numerous that no politician will rock the boat, partly also because they themselves are Baby Boomer Home-ownerists. The Baby Boomer generation is deliberately ruining the lives of their own children and grandchildren.
Though it is certainly true that the housing crisis is the biggest threat facing the country, I have little hope of any improvement, as politicians are either spineless, complicit, or well-meaning but drowned out. We have seen in the last couple of days what happens when politicians eschew decent policy and action on the say-so of destructive and over-powerful vested interests, but unlike the media, housing will be not be a huge eruption of crisis but a slow decline which will destroy this country.
Its certainly not been made any easier for young people with increased pressures coming from student loan contributions, increased pension contribution % and an increased cost in basic living (be that food, running a car, paying rent, public transport and household bills).
I think there is a reluctance on the part of governments to build sufficient housing, or to encourage them being built, as this would shift house prices downwards (to an equilibrium rate), meaning some would enter into negative equity (which of course is not pleasant), and others would see their assets drop (which may upset many conservative voters!).
I agree that something needs to be done, if it is to be done, it will certainly have to be the Lib Dem side of the government benches pushing very hard.
The absurd house price increases over the last decade were driven by demand, not supply (unless you believe the estate agents that keep telling people there’s a shortage of housing). Although increased homebuilding would be welcome, it would not alleviate the problem. We have 800,000 empty properties in the UK and the remaining housing stock is very unevenly distributed with some people living in houses that were designed to house many more people and also many second homes that lie empty most of the year. The economically literate method of regulating the housing market is with a Land Value Tax. Failing that, any of these would reduce demand and improve affordability for first-time buyers:
Enforce salary multiple limits on lenders
Tax buy-to-let
Introduce a land value tax
Enforce minimum standards for landlords that are letting to those on housing benefits
Remove the council tax allowance on vacant properties
Increase Base Rates
Put a capital gains tax on first homes
etc
Put up the costs for landlords and house prices will come down – then people can buy their own homes and they themselves will be in charge of making sure the accommodation is fit to live in. It’s not rocket science, but until we recognise that the cause is primarily on the demand side then there is no hope of finding a solution to a problem that is crippling our economy. The slashing of base rates has prevented property prices falling to where they should be. Whilst low rates are needed to help stimulate the economy, the unwelcome effect of propping up house prices needs to be addressed by taxing inefficient and wasteful use of existing stock (base rate slashing will only slow the descent of property prices – far better to act now and get prices down as soon as possible – I say this as a home-owner ).
“We need to get the banks to revisit their lending policies.”
That’s the worst thing that could happen to the housing market. The problems in the housing market were created by loose lending – why would anyone wiush to burden the younger generations with even more debt? – and who’s going to bail them (and the banks) out when the enforced lending fails? – their children’s children’s children?
great article, Stephen. i saw you speak at the launch of the smith instituture report ‘the end of the affair: implications of declining home ownership’ the other week and was very impressed – you were streets ahead of the tepid, unapologetic and generally unhelpful Alison Seabeck.
It seems that housing is finally at the top of the political agenda – and about time, too. Previous articles on LDV have shown the paucity of libdem housing policy thus far. we have in the past advocated good policies on empty homes, and going further back had talked about community land trusts and ‘golden shares’ and clever wheezes like that, but have been frustratingly silent on a national approach to what is a national crisis. That needs to change.
Our Coalition partners are intent on ‘residualising’ what is left of council housing – making it a commodity reserved for the most desitiute and vulnerable, and something they should get out of as soon as they possibly can. The Conservative plan to essentially abolish council housing is something we should loudly and proudly disassociate ourselves from. As part of this, can i suggest that Stephen start a policy group to draw up a decent housing policy for the party, starting with the acceptance that what is needed is a massive increase in supply in the south of England, and that this should be both from a commitment by the state to fund and build social housing, and through a release of institutional finance for PRS investment?
I cant understand why they don’t start building affordable homes big time,
Get 1000s back to work, There are people waiting to buy affordable homes so no problem selling them.
Firms selling the building materials, new white goods, furniture, carpets the list goes on.
There’s your growth.
France can build 300,000 homes per year, so why not this country.
I do think the country is being run by fools.
Apart from the word ‘deliberately’, Bolivia’s comment is excellent, as is Dale’s. I’ve commented on other recent housing articles on this site before and won’t repeat myself.
I also wonder if some of this boils down to the electoral system. The major parties need to appeal to the centreground – swing voters in marginal constituencies – and to get into government can’t propose anything that upsets them. Proportional representation would solve this.
In addition, given wards and constituencies are organised geographically that means MPs and councillors are predominantly accountable to long-term residents. Private rented sector tenants are frequently hopping from house to house, and inevitably from constituency to constituency. This means getting themselves on the electoral register is harder, and holding their representatives to account nigh on impossible, given they are different between elections. Larger wards and constituencies would help, but they would need to be multi-member to cope with their size. Oops, have I just shown how PR is needed again? Hate it when that happens 😛
House prices went up so much over the last decade because the banks lent more and more money to people.
Houses prices haven’t fallen very far, yet, because interest rates were slashed.
Any discussion of housing, no matter how well meaning, that doesn’t address those two salient facts, is doomed.
Great article Stephen.
However, I did write recently to my local (Lib Dem) MP about housing issues and got pretty short shrift, so I’d say that there is still a mountain to climb even within the Lib Dem party.
Speaking as a 30-year old professional, trying to do the right thing, earning within the top 10% income bracket for my area I can’t see any hope of ever being able to afford not just any property (I’m sure that if I wanted I could go and buy a cardboard flat tomorrow) but a decent place in which to raise a family, even taking my partners earnings into account.
I hope that this represents a change in opinion within the government, but given recent actions to support current house prices (such as gifted deposits, and the continued low interest rate) rather than encourage more building I honestly can’t see it happening.
Good luck though, from a genuinely concerned citizen!
If we had a decent political left in this country, they would be educating younger people on how inequitable the housing system is and organising huge protests about it. They would be making sure the sort of reforms necessary to ensure people have decent housing when they need it are in place, however much those reforms might hurt older people who have got used to houses being cash machines. We do not, however, have a decent political left in this country.
There is not a single mention in this article, or the comments to date, of the impact that loose lending from financial institutions has had on this country’s house prices. The market is trying to correct itself and has been for longer than people think. In the run up to 2008, ever more ‘innovative’ lending solutions such as self certification mortgages (aka ‘liar loans’) and loan-to-value lending of 125% further fuelled the ponzi pyramid fire that saw UK house prices triple in a decade. Only the imminent collapse of the lenders’ balance sheets and the global banking system with them stopped this madness.
House prices then quickly began to fall to more affordable levels. However, interest rates were slashed to 300 year lows, mostly in an effort to keep those who had extended themselves too much in the overpriced property they bought. The Support for Mortgage Interest Scheme (SMI) has then assisted those who lost their jobs to stay in overpriced property. With the taxpayers’ bailing out of the banks, government pressure was put on lenders to show further forbearance to those behind with mortgage payments. Combined, these acts of deliberate market interference have kept house prices high while transactions in the property market plummet. To compound Generation X’s misery, low interest have lead to a flurry of overseas buyers taking advanatge of the weaker Pound to snap up properties in London.
As a nation, we need to stop taking from the prudent and responsible savers to rescue the financially irresponsible and indebted. This needs to begin by ending SMI and increasing interest rates – a move which would give savers extra money to spend and increase the value of Sterling to stave off the imported inflation that is currently wreaking havoc. The government should then instead focus on those who would be left in negative equity through these policies. As property prices come down, people will be spending less of their disposable income on servicing debt, leaving them more money to spend in the real economy and creating jobs in the process.
I second what Bolivia says. Fixing all this is easy – let’s go back to the 1950s or 1960s
a) Build more private housing and a lot more social housing;
b) More rights for tenants (such as much longer notice periods for landlords if they want tenant to quit or rent to go up);
c) Sensible lending criteria (max three times salary or two times joint, minimum deposit 20%)
d) Most importantly – let’s reintroduce “Domestic Rates and Schedule A taxation” – or more to the point, replace as many taxes as possible (starting with Council Tax, Stamp Duty, Inheritance Tax and TV licence fee) with Land Value Tax. And keep on scrapping other taxes and hiking LVT to reinstate the balance between young (work hard, pay a lot of tax, forced to live in small homes) and baby boomers (don’t work so hard, own all the housing).
Simples.
@ Mark Wadsworth – I note your point
“c) Sensible lending criteria (max three times salary or two times joint, minimum deposit 20%)”
and quite understand why you’d say it. But how will you square that with house prices in many parts of the country being way beyond three or even four times joint salaries (let along individual ones)? In London the average home costs ten times average salary. Your policy would basically make it illegal to borrow enough to buy a home! Surely that’s not what you intend – so how would you address that problem with your proposal? the onyl way I can see how it would work woudl be if house prices fell into line with the 3 or 4 x salary maximum, but that would take years and years of extensive housebuilding (a policy i back, by the way) to achieve. what would you do in the meantime?
Not a great deal to add to that above other than that I am not sure that Localism is the answer. My parents know – although they won’t actually admit it – that myself and my partner have been shafted by the same housing and taxation policy which has so benefitted them. If they won’t admit it in public, they are not going to support policies to change it (ie allow more houses to be built in one way or another to the detriment of their own “investment”). That I think is pretty much true of the whole generation of Baby Boomers. Even when it is their own children, the problem is too large and too frightening to acknowledge. It’s a classic Douglas Adams SEP.
But then, top-down (without people who actually want to impose what needs to be imposed from the top) has also clearly failed. Emigration anyone?
More naive nonsense on the ‘housing crisis’ with the forwarding of simplistic and blatantly unsustainable policies.
Stephen Gilbert is wrong, the “fundamental problem” is NOT that “we don’t have enough homes and we need to build more.” The real “fundamental problem” is that we have far too many people and we need to reduce the population of the UK to a level that is genuinely sustainable. Stephen Gilbert’s proposals would just continue the present trend of escalating population growth, with evermore environmental degradation, resource depletion, dependence on imported food and energy, biodiversity loss and reduction in quality of life due to overcrowding.
The time is long overdue for governments and political parties to start acting responsibly on this issue and recognise that we will never solve the ‘housing crisis’ (or the ‘transport crisis’ or the ’employment crisis’ or the ‘climate change crisis’ or the ‘biodiversity loss crisis’ etc etc) until we act to stop unfettered population growth (not by coercion, but by means of education, and tax, allowance and housing incentives, and reducing immigration). Unfortunately these areas are too ‘difficult’ and taboo for most politicians, especially those who put their dogmatic political beliefs before the practical reality of finite land area and resource availability. For them it is far easier to say “build, build, build – keep concreting over our countryside, ignore the fact that the land is needed for growing food, producing energy and providing ecological services essential to life, and ignore the fact that more building will encourage even more population growth and even more demand for resources – just build, build, build”!
London Liberal: “The only way I can see how it would work woudl be if house prices fell into line with the 3 or 4 x salary maximum, but that would take years and years of extensive housebuilding (a policy i back, by the way) to achieve. what would you do in the meantime?”
I would do absolutely nothing – if there were such a policy (and if it were enforceable), then house prices would drop accordingly within six months. For sure, normal mortals still wouldn’t be able to buy a house in Chelsea, but so what? We can commute into London if we have to. Like I’m saying, all I recommend is turning the clock back to policies which worked before, which work in other countries and would work again.
“There’s no panacea and there’s no quick fix” – yes there is – Land Value Tax.
Manufacturers employing lots of people pay huge payroll taxes. They are useful – they export and employ lots of people. Tax/land ratio is high.
Warehousing employs few, but uses large amounts of land. They use state funded infrastructure. So tax/land is low.
Companies (and the Inland Revenue!) rent property from foreign registered companies that pay NO UK TAX!!
Companies register abroad or spend huge effort minimising tax, often leading to lower productivity and misallocation of investment.
Change this madness, charge according to land use permission (planning) * land area.
Scrap payroll taxes, corporation tax, vat and other taxes that are expensive to collect and often evaded.
Taxing the land in relation to the usefulness (planning permission, location, infrastructure built by the state) is simple, cannot be avoided or evaded and is cheap and easy to collect. Publish the information.
As for residential – leave it alone if it’s politically difficult, concentrate on the commercial side first.
But better to add more tax bands (£1200 a year for a £10 million mansion in Westminster!?), end council tax discount on holiday homes.
Let’s not forget that Labour were planning to introduce increased regulation for the rental sector. It was the coalition government that deliberately removed those plans in order to prop up house prices for the landlord class.
@ Mark Wadsworth
“I would do absolutely nothing – if there were such a policy (and if it were enforceable), then house prices would drop accordingly within six months.”
Where do you get your figure of six onths from? i find it highly unlikely to be based in the real world. There is enough international cash as well as those with sufficient equity in the homes they already own to carry on being able to buy expensive properties. What you would do would lock out anyone else from being able to enjoy that right. You would further cement the divide between the hosuing haves and have nots, and would do more to drive away londoners from their home city, making it even more an enclave of wealthy foreigners, beneficiaries of the bank of mum and dad, and hedge fund traders. i’m not by any stretch advocating a loose lending policy of the type that we have seen in the past , and i think your aim is a good one. But I don’t see any evidence that supports your ‘six months’ assertion, and i think you need to plan for the (long) period during which prices will need to stabilise and allow earnings to catch up to make your policy workable.
You are right – this policy was there in the past. but house prices weren’t where they are now, and so you can’t just transplant it blindly onto today’s housing market. When the facts change, so should your solutions.
@ LL, what? So all these Russian Oligarchs and Chinese Aparatchicks will be snapping up terraces in Burnley and semi-detached houses in Ruislip? I think not. Central london will remain unaffordable for 99% of the population and everybody else has to make do with the 99.99% of the UK which isn’t Central London. Big deal.
Yes, those Baby Boomers people with spare cash are already ahead of the game, there is nothing we can do about that, but there’s only so much spare cash sloshing about and once it’s been spent it’s been spent.
Trying to level the playing field by allowing young people to borrow unaffordable amounts is like arming people with knives instead of boxing gloves, it’s a race to the bottom, only one person can buy a house, and if the loser (the person who buys it the house) ends up with a stab wound, that’s far worse than having a black eye.
Mark – I’m not even talking about central london. the issue relates to most of the city, as well as to expensive places around the country. It seems that you are supremely unbothered about effectively making it impossible in law to buy a home in the home city of 10% of the population unless someone in your family is both dead and well-disposed towards you. Evidently you either have a house yourself or don’t live anywhere expensive, so you’re not bothered about this outcome. Well, lots of people do live in those places, and could afford a slightly higher mortgage, and do care about being barred from property ownership by your policy. Ultimately, it should be up to the banks to decide in individual cases, within a broader framework than you’re suggesting (although in honesty, you’d be lucky to get a big mortgage from them anyway at the moment).
Yawn! yet another article repeating the tired out mantra “we don’t have enough homes and we need to build more.”
I strongly recommend that you re-read the governments own statistical data with a critical mind.
The fundamental problems are total population and average numbers of people per household coupled to the land available and the uses we need to put it to. Remember prior to 1997 a large problem wasn’t so much as there being a shortfall in the number of houses but that households were getting smaller, we also had a (very) slowly declining population (around 100,000 pa) due to net migration.
Post-1997 population growth has been in the main fuelled by unsustainable levels of immigration (encouraged by government policy) and births within this new population. Projections for housing demand largely assume these levels of immigration will continue and that a higher level of births can be attributed to this new population.
What I find interesting is what these statistics leave out. Firstly, they assume government policy will have no effect on immigration levels, but that secondly no allowance is made for real world threats such as: climate change, economic exhaustion of fossil fuels, substantial increases in world population, food security (remember we import mainly by air over 50% of our food today), energy security.
So the fundamental problem is: what is a sustainable population for the UK to have by 2050?
For example, if we take food supply on it’s own then the UK population needs to be reduced to 30~40 million.
Once we have determined this everything else follows.