Tag Archives: David Lawrence

This article draws on “Hitting housebuilding targets would reduce rents by £251 a month” published by the Centre for British Progress, written by Rob Blackie, Tim Leunig and David Lawrence.

Andy Burnham’s recent promise to tackle the cost of living pitch ignored the most practical approach: increasing housebuilding to bring down rents. This week the Office for Budget Responsibility predicted that people will get poorer in the next few years. If Britain focuses on cutting rents we can reverse that trend.

The typical British renter spends three times as much on rent as on food, and five times as much as on energy. And in the most expensive areas, such as London and the South East, renters typically spend 40% of their incomes on rent.  And this isn’t because we’re spending money on good housing either. Britain’s housing is smaller, and lower quality, than our European neighbours.

The costs affect not only renters, but all of us. The government spends around £37bn a year on housing subsidies, money we all have to find via our taxes or lower public spending elsewhere. This is the highest rate of any comparable country. There are less obvious costs too: businesses face high rents in London, and skilled individuals can’t afford to move there, constraining the growth of successful businesses in our most successful city. National income – and tax revenues – are lower as a result.

Our high cost of housing can be explained by simple supply and demand, nothing more and nothing less. For instance, London’s population has grown by 1.6 million people this century, and supply hasn’t kept up, constrained by planning rules that prioritise golf courses over house building.

It is reasonable to ask whether new private housing, aimed mainly at people on relatively high incomes, will lower rents more generally. The Prime Minister implies not, hence his currently unfunded pledge to create the “biggest council house building programme” since the 1950s. This would cost tens of billions of pounds a year. This is an admirable ambition, but very unlikely to happen when our government is short of money.