The housing crisis – long overdue for some “big ideas”

You can tell things must be getting really bad when even the Conservatives are concerned about the shortfall of affordable houses. Survation recently polled 121 senior Conservative councillors, on behalf of the Joseph Rowntree Foundation ahead of the government’s publication of its social housing green paper, expected in the next few months.  The poll found 71% were concerned that the £2bn Government set aside for affordable housing in the Autumn Budget will be insufficient to meet the needs of their constituents.

So what solutions do we need?  Alex Marsh, a housing policy expert, has set out some truly radical proposals n the Social Liberal Forum’s new book, Four Go In Search of Big Ideas.  After setting out the commonly accepted “truths” of our current housing crisis, he crucially asks, “Is it all about new supply?  He argues:

A more profound criticism of this [supply] approach to dealing with our housing problems is that it is based upon a misdiagnosis. The argument is that if we view the issue in terms of the amount of housing available relative to the number of residents then the country is not suffering from a significant shortage of accommodation. The issue is its distribution .  Some people are occupying a lot more housing than others, many households are squeezing into overcrowded accommodation and others are squeezed out of the market entirely. In this respect the problems of the housing market are in part a manifestation of broader social and economic changes, including changes in income and wealth inequality or welfare reform and increased use of benefit sanctions. We see problems in the housing market, but they are not necessarily problems of the housing market.

It is through these kinds of radical ways of looking at our current problems that we can generate new ideas and new solutions.  And Alex proposes some truly radical liberal ideas—ideas that should be of interest to any true Liberal.  He says: 

If we are going to solve Britain’s housing problem then we are going to need more profound change: a change to the way we understand housing. We need to view housing primarily as a means of meeting fundamental human needs for security, shelter and privacy rather than as a vehicle for passively making large amounts of money. We need to recognise that the housing system that we have allowed to develop is a mechanism for increasing inequality and for transmitting inequality across the generations. We need to recognise that there are significant environmental and social costs to arguing for more house building as a means of dealing with the housing problem, while failing to ask searching questions about how our existing housing infrastructure is distributed and utilised. We need to accept that our current understandings of how a housing system should work needs a radical overhaul.

Provocative? I hope you find it is!  You can find out more about the SLF’s new publication here.

The eighth annual conference of the Social Liberal Forum takes place in London on 28th July,  and it will be about Big Ideas and the themes of the book.  The early bird rate is still available!

We hope you can join us to be provoked, think radically and enter the debate.

* Helen Flynn is chair of the Social Liberal Forum and a member of the Federal Board.

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25 Comments

  • Andy Williams 3rd Jun '18 - 3:44pm
  • Helen, thank you for raising this issue. It’s good to see LDV getting back to the nitty gritty, outward looking stuff which really concerns the electorate.
    I think that people have already started to see property in terms of security, shelter and privacy rather than a chance to make a financial killing. There is a limit to the level of house prices, expressed as a multiple of average wages, which can be sustained by the market and we must be getting somewhere near that limit. It follows that future house prices will be limited by wage growth, which is itself a function of productivity (and we all know that’s something which is going to have to be on the governments agenda.)
    On the specific issue of young people getting on to the housing ladder, the major impediment seems to be the restrictions placed on lenders post 2008 banking crisis. Many young people have to find £7-800 per month to rent a flat, but find that no lender will give them a mortgage on a similar property that might only require a monthly repayment of £500. Not only is that illogical, but in making people rent when they should be able to buy, it is feeding the buy to let market and boosting prices at that end of the market.
    The other big problem is the need for a 10% deposit, which for many means years of saving or if they’re lucky a trip to the bank of mum and dad.
    So in summary: 1) regulate the buy to let market to take the heat out of the lower end. 2) Reduce deposit required for first time buyers to 5%, or even less. 3) Reduce stamp duty to improve the the turn over of middle priced property (thereby increasing supply of properties at any given time.) and 4) Continue to increase new builds, with government intervening there necessary to ensure planning consent is granted.
    Most of the above has been suggested by various people at various times, so I claim no great original insights, but for some reason it hasn’t happened yet.

  • Under-occupation of houses is encouraged by the tax system, resulting in 25 million surplus bedrooms. The housing crisis is in fact a symptom of a much wider social malaise: growing wealth inequality, and the growing inter-generational divide in which “the money borrowed by young families” to enable them to buy the smallest new homes in Europe ends up “in the bank accounts of older households” .
    First time buyers without wealthy parental support are now near 40 on average: a typical 25-year loan will leave little time and money to save for a pension.
    More than a third of total English housing stock is under-occupied, i.e. there is more than one spare bedroom. The figure was 1/5 in 1971 – but most of the rise is since 2003. Whereas the ‘bedroom tax’ on non-pensioner occupiers of rented housing is based on only the exact number of bedrooms a household ‘needs’, owner-occupiers – including 80%+ of over-55s but well under half those families with dependent children – have no incentive whatsoever to down-size. Probably 90% of spare bedrooms are in pensioners’ owner-occupied properties. Only in the over-65 age-group has owner-occupation increased since 1991. Meanwhile households living in the private rented sector are set to double between 2007 and 2020.

    Land Value Tax is part of the solution to homelessness and overcrowding. For further information about housing and land value tax see the report https://libdemsalter.org.uk/en/document/alter-conference-flyers/alter-flyer-lvt-housing-2015-a4-folded#document.

  • Mark Seaman 3rd Jun '18 - 10:00pm

    UK population year 2000 was aprox 58.89 million. Year 2016 it was aprox 65.64 million. (Many caveats regarding these figures to be sure, but there is less of an issue iro the population growth assessed therefrom) .Unless that rate of population increase is seriously addressed, the future for most people will be multi-occupancy renting.

  • Simonmcgrath 3rd Jun '18 - 10:30pm

    So what actual suggestions does he have do deal with the problem

  • William Fowler 4th Jun '18 - 7:15am

    Small one bedroom houses are usually in poor locations and on poor plots, retirement apartments come with high overheads, councils throw a fit if you want to build a small house on a plot that already has a large house on it… not sure where the elderly householder with empty rooms should move to. Some let family members use part of the house (possibly illegally if they build a second kitchen and don’t tell the council who will then consider it two properties in one, try to up the already extortionate council tax), others don’t want any kind of change in their lives. Many live in fear of social workers and councils deciding they can’t look after themselves and effectively confiscating their properties to pay for care.

    This op-ed is a link to buy a book so you have to pay money to find out how the author addresses these, and many other, problems in the housing market. Taxing householders out of their properties is possibly the author’s solution.

    You are allowed to rent one room tax free without affecting capital gains at the moment, perhaps extending that to two rooms might help matters (with limits on the amount of tax free money that can be charged for rent which is under market rates) but at the lowest level of homelessness – the drunks and addicts – no sane person is going to want them in their homes and even councils refuse to house them due to continual abuse of their “largesse”.

    An yes, the ten million increase in population since the end of the Thatcher era is at the root of the problem.

  • @joeB. Good point about older people in houses that are really too big for their needs. Difficult in the private sector as in many areas such properties are beyond the affordability of younger families unless someone in the family has a highly paid job. I still think that a reform of stamp duty would encourage older home owners to trade down.
    I am acutely aware that much of this discussion is of no use to poorer people who will probably never have the resources to buy their own home and therefore there is a separate discussion to be had about social housing.

  • Ah, the “Dorling response” to the housing crisis. 🙂

    Demand for housing and the rate of household creation has always been dynamic – if housing is cheaper and/or smaller in aggregate then new households will form more quickly as there are more opportunities for, for instance, young singles, instead of staying at home, to branch out earlier.

    I agree, with Danny Dorling, that we do quite possibly have the highest number of rooms per person in this country than ever, but that it is not distributed in a way that makes best use of them. But set against that, we still have amongst the smallest housing in Europe, and certainly we are building some of the smallest (in most Scandinavian countries they build at least 50% larger properties.

    So there is no reason to take an approach I think of as like the scene at the beginning of Dr Zhivago where the Bolsheviks are reallocating housing space from the wealthy to the poor. And that just wouldn’t work anyway as the spare space is not often in the right place for the demand.

    We should in a sense be happy that the Tories are also clamouring for more. It was not until all parties and interest groups recognised a crisis after the first world war and finally produce the “homes for heroes” type campaign that the work of people like the Booths and the Webbs and the Rowntrees that had been going on for decades, finally bore fruit in a large scale building campaign.

    But their fatal mistake then and it looks like being the fatal mistake again now with every party pitching in with a sweepstake on the number of new builds we “need” to get votes, is that however much you build now might have an impact on the market now, but a decade down the line when everyone’s put down their shovels and hods and sent the subcontractors home, is that it will not last, until we make people pay for the use of common space, land, that they wish to exclude everyone else from.

    Only through making people pay the ground rent for community use, instead of punishing their labour through taxes, will people have an incentive to economise on the precious locations that give people opportunities to access employment, social and other opportunities. And that must underpin any efforts now to break a logjam created by decades of underprovision in the in demand locations.

  • But…BUT…none of this is an excuse to argue against housing now where it is really needed. At least a generation of people in places like Oxford, and quite possibly more like two generations, have been robbed blind by housing shortages and any fix needs to include meeting at least the current hotspots.

    As well as for the future, stopping the private accumulation of the wealth we all create in areas that manifests itself in land prices.

    Lloyd-George, often seen as a great champion of the land tax solution, capitulated to the post-war demand and thought that building more would solve the problem and gave up his enthusiasm for land taxes as a result. This was”short-termism” and we must not let our policy solutions to this crisis suffer the same problem.

    There’s nothing wrong with having large houses and more space. In a wealthy developed economy we should be able to expect that. Instead our housing gets inexorably smaller in general. But people who occupy valuable locations and exclude others from them need to compensate the community for enclosing the commons. And when the ongoing cost of doing so becomes too high because of the work of others in producing infrastructure, services and community that they no longer use themselves, land taxes will encourage them to liberate that location for those who can make use of the opportunities afforded.

  • Ian Hurdley 4th Jun '18 - 9:00am

    We talk about ‘housing’ and ‘under-occupancy’ as if we were dealing with a problem of redistribution and seeing it as fundamentally a bean counting exercise. These kinds of mistakes were made in the fifties when the drive was on to finish the job the Luftwaffe had begun; to demolish slum property and replace with new. Salford, the city where I grew up was one of the pioneers in building high rise blocks of flats to replace the cold, damp, unsanitary terraces from the Victorian era. What rapidly became apparent was that in reality people don’t live in ‘houses’; they live in ‘homes’. Moreover, those homes are located in communities, not in isolation. This is why the arithmetical approach fails; to say to someone, “ You are one person but you have three bedrooms. Let us help you to move to this lovely one bedroom apartment a couple of miles away.” is to discount the love they have invested in turning that unit into a home. It also ignores the fact that their friends live all around them in the same area, and that as they age (under occupancy being more prevalent among the elderly) their mobility reduces, making it burdensome to travel back to see their friends whilst also adversely affecting their ability to build a new social network.
    I don’t know how we factor this aspect into the housing equation, but having seen the social consequences of ignoring it, I know it has to be at the core of policies to deal with homelessness and overcrowding.

  • ……………………………………..A more profound criticism of this [supply] approach to dealing with our housing problems is that it is based upon a misdiagnosis. The argument is that if we view the issue in terms of the amount of housing available relative to the number of residents then the country is not suffering from a significant shortage of accommodation………………

    Absolutely meaningless!
    One might as well state, “if we view the issue in terms of the amount of ‘money’ available relative to the number of residents then the country is not suffering from a significant shortage of ‘money'”

  • @JoeB
    I know this is your hobbyhorse but the minute this party taxes an asset we become socialists. This is not Liberal IMO. Nor is telling people that they don’t have a right to a spare bedroom if they want one.
    We have to be very careful with the housing market. Telling people we are going to reduce the value of their house is not going to go down well at the polls. The country’s financial system is addicted to high house prices and the withdrawal symptoms could be fatal if not handles with care.
    There are things that can be done. Here are a few ideas that may offer the tool kit to address this issue.
    A return to proper town and country planning with compulsory land purchase (L.V. Capture). Regulation of mortgage lending to make it more lifetime fixed interest in nature. Changes in the way houses are valued in the secondary market. Possibly capital gains on primary house sales. Long term re balancing of wealth distribution between areas of the UK. Above all you cannot precipitate a housing market crash. Policy should be focused on taking many decades to put this issue in order. This is not an easy issue with quick fix.
    If you look at where you want to end up there is going to have to be a total change in the psych of country in its relationship with housing. Take a look at Japan if you want a salutary lesson in housing bubbles.

  • Tom Papworth 4th Jun '18 - 10:51am

    The misdiagnosis is to see housing as a means of meeting a set of fixed human needs, rather than as something people will choose to spend more on in return for higher standards of living.

    We shouldn’t be surprised that demand for domestic space is income elastic. Of course people want to convert increasing levels of wealth into higher domestic space. The advantages of a 4m by 4m living room over a 3m by 3m living room are obvious; so is the desire for each child in a household to have their own bedroom; for a separate study; for a family to have more than one bathroom; etc. Not sharing a wall with one’s neighbour provides additional peace and privacy, both clear amenities. So does having a private garden.

    The suggestion that a semi-detached house with a 20m garden is a luxury good and that it is somehow greedy to want one is absurd. Needless to say, those who argue that way are usually already homeowners.

  • William Fowler 4th Jun '18 - 11:16am

    I think the only fair way of dealing with housing, rather than taxing people out of houses’ that are too large for them, is an inheritance tax levy and a sales tax, the former surely the best way of redistributing wealth and stopping generations having an unfair advantage. If it was ring-fenced for new social housing it would probably be acceptable to a large enough segment of the electorate.

    If you really believe that property ownership is theft, the Labour party awaits your vote.

  • Matthew Huntbach 4th Jun '18 - 11:42am

    Most people will say “build more houses” is the answer to the problem, but then will object when it happens near them. When I was a councillor (for a ward in Lewisham East …) sitting on planning committees, almost every plan to build new houses got strong local opposition, with claims that you were ruining the pleasant atmosphere of where they lived by agreeing to it, and suggestions that you must secretly be bribed by the developers if you agreed to something that the locals opposed. Almost everyone just assumed councillors could arbitrarily reject any planning proposal, and never got the point that you could only do so if there were legal grounds to do so, otherwise the decision would be taken to court and overturned and the council would lose money. So most times, even if you wanted to agree with the locals, council officers advised you not to do so, as in reality developers would already have made sure there were no legal reasons to stop them before submitting their plans.

    Also, as Tom Papworth puts it, you are never going to meet needs just by building more. People will always want more and bigger housing. If it more profitable to build more and bigger housing for those who already have it – and it is – rather than housing for those who don’t, then that is what will be done.

    Most housing now is bought partly funded by inheritance (if not directly, then through “bank of mum and dad”) and since inheritance largely comes from sale of housing and costs of housing is what those buying it can afford, that means that house prices are pushing up house prices.

    There is no easy way round this. I’ve always supported high inheritance tax, but found that when I suggest it, most people react strongly against me. Any other sort of land tax is also going to get strong opposition, with the usual case of the little old lady on a low income in a big house in tears because she can’t afford it being brought out to make us feel bad. The answer to this is to allow the little old lady to stay there, with tax paid through property share with the state, so it only turns into cash when the house would be sold for inheritance. Err, then we have the same inheritance tax issue. Indeed, a sensible proposal to do something like this to pay for care was the main reason the Conservatives did so badly in the last general election. The Liberal Democrats joining in the attack on the Conservatives for this was truly shameful.

  • Ian Hurdley 4th Jun '18 - 1:08pm

    A separate issue but equally important to future policy is Britain’s obsession with bricks and mortar. Builders prefer them, so do mortgage lenders and so do buyers. In New Zealand and also in Australia, I saw for myself the benefits to me derived from off-site, factory-based construction techniques and materials as regards space, flexibility in layout, insulation, energy efficiency and cost. At present our only exposure to technological developments appears to be from TV programmes like Grand Designs and DIY SOS Big Build.

  • I see everyone, other than Mark Seaman has ignored the elephant who has been in the room since the late 1990’s, when Westminster adopted, without consulting the British electorate, a particularly daft strategy to address the changing population demographic…

    Given the recent LDV article on the impending water shortage, and others about the impending perfect storm, I would have thought simply demanding more houses are built to cater for a growing population is a head-in-the-sand policy…

  • Peter Martin 4th Jun '18 - 9:19pm

    So you want to build lots of houses and flats without ” it costing the taxpayer” anything? This is how you do it.

    The govt can easily raise money by selling bonds. (if that’s the way you want to look at it). At present it costs 1% pa on 5 year bonds. So say the Govt sells £1 billion pounds worth of bonds. It builds 4000 properties at a cost of £250,000 each which uses up the entire £1 billion. So what happens to that £1 billion as it gets spent into the economy?

    A lot of it comes back straightaway as tax. Architects, Builders, carpenters, labourers etc on building sites pay income tax and national insurance. They’ll spend some of their pay down at the pub which will attract VAT and alcohol duty. They’ll go and watch a game of football and buy cars etc. That all adds to the tax take. In fact all that billion will come back as the money is spent and respent in the economy unless it is saved. Let’s assume that £900 million comes back as tax revenue.

    So we’ve now built 4000 houses for £100 million but the market price is £300,000 on average. We sell them all for £1.2 billion which gives us a tidy profit of £1.1 billion. OK maybe a little bit less if we count in the interest on the bonds.

    This is not really the way to look at Govt spending BTW! But it’s a good argument to put before the many neoliberals in our Parliament who will want to know where the money is going to come from!

  • >”This is not really the way to look at Govt spending BTW! But it’s a good argument to put before the many neoliberals in our Parliament”
    @Peter, I think the last time this type of thinking was tried out was with the 2009 Scrappage Scheme, where I seem to remember the government did rather nicely ie. it got back more than it paid out… 🙂

  • Issuing bonds does not of itself build new houses. You need land in the right places, labour with the right skills and capital (cranes and construction equipment) and an equal level of investment in public infrastructure (roads, schools, medical centres to support housing and commercial developments) i.e. real resources.
    While the government can enact legislation to make land available at existing market prices, skilled labour has to be drawn from other areas of the economy and retrained; and additional construction equipment has to be manufactured. This takes some time and planning.
    The government could issue land bonds and buy as much land as is needed for public housing, paying the interest on the bonds from ground rents on the land and using the surplus to build affordable housing and infrastructure. This in effect is what Singapore has done since gaining independence and how Hong Kong and Taiwan finances its public housing and road and rail infrastructure.
    As a first step, reform of the 1961 Land Compensation Act should be considered so that agricultural land can be acquired at existing value excluding premium payments for hope value. As a second step, interest collected by financial institutions on mortgages used to acquire land could be taxed a rates sufficient to ensure that the bulk of economic rents earned from financing of and is collected for the public benefit.

    Local authorities are currently buying land at premium prices to develop housing for sale at full market prices using the profits to build a small number of council houses for rent. At the same time vast tracts of public land are being sold off by the NHS and other public bodies to plug budget gaps. This is an NHS that is addled with PFI contracts that drain very significant levels of funding out in the form of lease rentals.

    None of this is joined up thinking. All the while, 4m patients are waiting for operations/treatment, local authority housing lists are near 5 years on average and the number of rough sleepers continues to grow.

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