The roots of the UK’s housing crisis run deep. Two reports published last week agree on this much, though the conclusions they draw from looking back over the past 70 years of supply, demand, policy and price changes are quite different.
Last week Samuel Watling and Ant Breach of Centre for Cities published their report on “the UK’s four million missing homes”. It analyses historic housebuilding stats and finds that the alleged golden age of post-war mass housebuilding was not so golden after all. Housebuilding rates actually fell from 1947 onwards compared with the pre-war period, and the UK underperformed many other European countries in terms of building enough homes to keep up with population growth.
From this, Watling and Breach argue that the fundamental blight on UK housebuilding has been the 1947 Town and Country Planning Act, which established the role of local authorities in setting local plans, identifying land for development and granting planning permissions, rather than the decline in council housebuilding after 1980. They argue that under the auspices of the Act and its successors land supply has been constrained by measures such as Green Belt protection. Furthermore councils’ discretion in granting planning permissions means that even what is proposed in plans may not be permitted in practice.
Consequently, the report proposes planning reform as the key to unlocking faster and more affordable housebuilding, particularly in London and south east England where supply has fallen furthest behind demand and prices and rents have risen most. The authors’ favoured solution is a zoning system, which would establish frameworks for development in local plans (including in Green Belt locations with good public transport). They would then allow developers to build in line with those frameworks without needing additional permissions. The government had plans to move towards a zoning system, but those were dropped in 2021. Centre for Cities urges it not to water down the more modest reforms now included in the Levelling Up and Regeneration Bill.
The other report, entitled Reboot, was published by the Joseph Rowntree Foundation (JRF) the day after the Centre for Cities report came out. Written by a veritable housing supergroup comprising Rose Grayston and Toby Lloyd, formerly of Shelter and the No Place Left Behind Commission, and analyst Neal Hudson, whose insights plot an assured path through the marshes of UK housing market data, it too looks back to the 20th Century to understand the housing crisis of the 21st.
However, rather than foregrounding planning, Reboot focuses primarily on how policy has shaped markets and what this means as we enter our fifth downturn in 50 years. The authors observe that every downturn prompts a response that may deal with the immediate crisis but entrenches chronic problems more deeply. For example, Help-to-Buy equity loans helped revive housebuilding after 2013, but also added inflationary pressure.
The net effect, though the report does not use the term, is moral hazard writ large. Homeowners get all the advantages of house price growth in the boom years, and when the going gets tough governments take action to bail them out and prop prices up, so they soar out of reach of first-time buyers without rich families or lucky lottery numbers.
We are now nearing the end of what Reboot’s authors call the “decadent era” of growth since the mid 2000s, with London at the forefront both of house price deceleration and of slowing construction. The report considers what might happen next – from a rapid return to growth to a fully-fledged crash – and identifies four potential problems: housebuilding drying up as builders wait for the market to revive; an investors’ market where interest rates make life difficult for first-time-buyers but offer rich pickings for buy-to-rent; serious impacts on vulnerable groups, particularly heavily-leveraged recent London buyers; and the market freezing up as sellers, accustomed to rising prices, delay selling or downsizing.
Unlike the Centre for Cities report, which focuses on one big recommendation, Reboot offers more than a dozen, looking at short-term action to protect the vulnerable, medium-term measures to sustain supply, and longer-term action to remodel the housing market. The planning system is only incidentally discussed. Instead the authors look at incentives to implement permissions, flexible funding for affordable housing, better support for low-income homeowners and renters, heavier taxes on landlord investment, and even restrictions on who can buy homes in some “housing pressure zones”.
Reboot sees the value of home ownership, but also prompts deeper questions about what sort of housing market we want – or need. The gains from runaway house price growth are curiously intangible, only realised when downsizing or passing wealth between generations, while the damages done are all too visible. As the authors write, “We must recognise that a housing system beset by regular booms and busts does not meet the needs of the national economy or those seeking safe, secure, affordable housing. A more sustainable, equitable and economically efficient housing system must obviously be one in which house prices do not continue to rise much faster than earnings.”
There are things to argue with in both the Centre for Cities and the JRF reports. Deregulating planning on its own, without substantial investment, is unlikely to build the affordable housing London needs. Conversely, a nationalised property tax, as recommended in Reboot, would impose an unfairly heavy tax burden on Londoners (even if partially offset by the abolition of stamp duty).
However, both reports seriously address the housing crisis as a product of more than half a century of well-intentioned but sometimes self-defeating interventions and policies, rather than as some sudden phenomenon. They are contrasting in analysis, but complementary in conclusion. London needs both planning that will enable growth (including in the Green Belt), and markets that are less stacked against new entrants and poor people in general. Our politicians should not let this crisis go to waste. These two reports offer them a credible programme for action.
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