Beyond the pale

When if ever will politicians catch up with the scale of the housing crisis unfolding before their eyes?

As the Homes for Britain campaign moves to the heart of Westminster, the default response of the major parties is to promise new homes. Traditionally, these come in multiples of 100,000:  the Conservatives want 100,000 and then 200,000 starter homes; Labour promises 200,000 new homes a year by 2020; the Liberal Democrats say 300,000 with a tenth of those being rent to own; and the Greens want 500,000 rented homes.

It was ever thus of course. Back in the 1950s, Labour and the Conservatives competed with each other to promise more homes. The difference was that they delivered. Macmillan pledged and then exceeded 300,000 a year as housing minister in the 1950s. This numbers game had major downsides in terms of design and build quality that we need to remember but it showed that governments were serious about housing.

If only the same thing could be said now. Only the Greens have a policy that recognises the scale of the crisis but their leader got herself into a tangle explaining how she would pay for it. Today’s rally should show that there are people within all the major parties who understand that bold solutions are needed: on the Conservative side, Tim Montgomerie is making the case for a return to the Macmillan era for The Good Right pressure group and in Times op-eds; on the Labour one, Frances O’Grady of the TUC argues that ‘the time for tinkering around the edges with housing policy is long gone’.

Instead, if I were searching for one word to describe the official responses of the party leaderships to the housing crisis it would be ‘timid’. There are political and economic calculations behind this stance but I’d argue it is in neither of their long-term interests to allow the status quo to continue.

Smarter Conservatives know that their old dream of a property-owning democracy is dying on its feet. For all their initiatives, home ownership has fallen by 210,000 and mortgaged ownership by 750,000 in the first four years of the coalition. Help to Buy is meant to be for first-time buyers but in reality it is Help to Sell for existing home owners and housebuilders. Shockingly, mortgaged ownership is now back at the level it was when Margaret Thatcher launched the right to buy.

A truly Conservative, free market solution to the housing crisis requires the construction of perhaps three million homes over the next decade in places where people want to live and work. But that means taking on the interests of the people who already live in those places. Since they overwhelmingly vote Conservative, it seems unlikely to happen.

Yet failure to act negates the very reasons why Noel Skelton came up with the idea of the property-owning democracy in the first place: in a modern democracy, people need to feel they have a stake in society if they are to vote Conservative. The expansion of home ownership in the 20th century was one of the drivers of falling inequality but shrinking ownership is creating new inequalities between and within generations.

Official Conservative policy appears to be to encourage that trend. Documents leaked to the Guardian show plans – blocked by the Lib Dems but likely to be revived in the election campaign – to raise the inheritance tax threshold for main homes to £1 million.

It’s telling that a memo by civil servants to Treasury minister David Gauke reveals that anxiety about housing is the motivation for the measure:

‘You have indicated a desire to reduce the burden of inheritance tax. Having considered the cost of a substantial increase in the existing nil rate band you and the Chancellor have indicated you would like instead to introduce a more targeted measure to allow the family home to be passed onto the children of deceased without it leading to an inheritance tax liability.

‘This reflects the concern raised by the public about rising house prices increasingly leading to estates with a modest house particularly in London and the south-east paying inheritance tax.’

However, the memo goes on to warn that:

‘People will increasingly concentrate the value of the assets in their estates in the main residence, pushing up its value. It will also push up house prices and possibly rents.

‘There is unlikely to be a corresponding increase in housebuilding because housing supply in the UK is price inelastic so this will make it more difficult for younger households to buy a house.’

Will the Tories really go ahead anyway?

On the Labour side, the Lyons-inspired plan for 200,000 new homes a year by 2020 is a realistic one that acknowledges just how difficult it will be to increase production and recognises that it is just the start of what is needed. The party has also seen that action is required to help millions of private renters priced out of ownership and relying on short-term tenancies.

However, it’s still a pale imitation of what a truly social democratic, let alone socialist, housing programme might look like. This would start from the proposition that the market has failed millions of people. For so long as the labour market keeps wages low and the housing market keeps house prices high, they will need other options. As Colin argues, social housing is an old idea but it still makes very good sense.

Labour has acknowledged its failure to build enough social rented homes between 1997 and 2010, when the stock actually shrank by 420,000 homes. This time around we are told that investment in new affordable homes will be ‘a priority’ without any specific promises and there is no explicit guarantee that they will be at genuinely affordable rents. Meanwhile the party stubbornly refuses to let local authorities borrow prudently against their assets to build more homes.

The current status quo of declining home ownership and social renting plus a drift to bogus affordable housing and an accelerating shift to private renting makes no more sense for the Conservatives than it does for Labour. Mortgages and social renting both offer a way of spreading the cost of housing over 25 to 30 years. Private renting means paying the current market cost for ever. It costs renters more and it costs the state more.

The Conservatives seem wedded instead to policies that benefit the shrinking number of existing home owners. A party that really believed in a ‘property owning democracy’ policy would start by levelling the playing field between buy to let landlords and first-time buyers. However, buy to let could even gain fresh impetus next months as a result of new pension freedoms.

The timidity all round is not so surprising in the context of the closest election for years in which the debt and the deficit are major issues. However, the implication that solutions to problems like housing somehow lie beyond politics may go some way to explaining why so many voters have lost faith in the mainstream politics on offer and why neither Labour nor the Conservatives look like getting a majority. The parties are offering pale imitations of themselves on housing when what we need is the real thing from both of them.

Bevan faced far worse problems in the wake of the Second World War and he and then Macmillan delivered. If only we had their vision now, and their seats at the Cabinet table, perhaps we really could solve the housing crisis within a generation.

Originally posted on Inside Edge 2, my blog for Inside Housing


2 Comments on “Beyond the pale”

  1. Martin Davis says:

    So Jules, what do you think about Inside Housing going ‘professional’, i.e. restricting access to subscribers. I suppose they want to keep the hoi poloi out – but these people, according to one way (my way, anyway) of looking at it, are their client base. Is this a further conspiracy amongst proressionals to keep the public out of policy discussions perhaps? A private place to talk about policies which might frighten the horses? I think we should be told.

    • julesbirch says:

      Mixed feelings really, Martin. On the one hand, I think information should be freely available and my IH blog will still be open access. On the other, if everything is freely available, how are journalists like me to make a living and how are magazines and newspapers to survive? Without independent journalism, the only information will be what’s provided by government and corporate interests with nobody to hold them to account apart from unpaid bloggers.

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