An empty vision from the ConservativesPosted: October 7, 2021
So now we know. The way to tackle the affordability crisis is to pretend that it does not exist.
There is no official confirmation yet but the clear message from the Conservative Party conference is that radical planning reform and the attempt to force through new housebuilding in the least affordable parts of the country are both dead.
In their place are vague assurances that building more homes in the North will help both to level up the country and take the pressure off the South East.
It was there front and centre in Boris Johnson’s invitation in his conference speech to:
‘Look at this country from the air. Go on google maps, you can also see how much room there is to build the homes that young families need in this country, not on green fields, not just jammed in the South East, but beautiful homes on brownfield sites in places where homes make sense.’
The prime minister still talked about ‘fixing the broken housing market’ but that is no longer a goal to be achieved by building more homes in expensive areas but a means to a different end:
‘Housing in the right place at an affordable price will add massively not just to your general joie de vivre but to your productivity. And that is how we solve the national productivity puzzle by fixing the broken housing market by plugging in the gigabit, by putting in decent safe bus routes and all other transport infrastructure and by investing in skills, skills, skills and that by the way is how we help to cut the cost of living for everyone because housing, energy, transport are now huge parts of our monthly bills.’
There was more in the same vein and some guff about ‘the dream of home ownership’ but you get the picture. Needless to say he had nothing to say about fixing parts of the market that are most broken for tens of thousands of leaseholders stuck in dangerous and defective flats.
Earlier in the conference, Conservative Party chairman Oliver Dowden was more explicit about having the ‘humility’ to look again at the planning reforms that were blamed for the party’s defeat in the Chesham and Amersham by-election:
‘Yes, Britain’s growing population must have new houses but it’s clear that additional safeguards are needed. We need to set out in law measures to protect our towns, villages and precious countryside from being despoiled by ugly development. Watch this space.’
Housing secretary Michael Gove did not mention planning and had little to say about housing in a speech from the main conference stage that majored on his priority of levelling up.
However, he made a revealing comment in a fringe meeting organised by Policy Exchange when he mused about a graph that an academic had shown him the night before about the ‘cripplingly unfair’ disparity of rents being higher than mortgage costs.
What was ‘incredibly counter-intuitive’, he said, was where the gap was highest:
‘You will automatically assume that the areas where the rent is proportionately higher than the cost of your mortgage would be in the South and South East. It’s not. The area where generation rent is suffering more is in Yorkshire and Humber and in the North East.’
And his conclusion for housing policy is that: ‘If you really, really wanted to help those who are currently in rented accommodation and want to own their own homes, then the focus shouldn’t necessarily be geographically where it’s been beforehand.’
Whether he really believes this or (more likely) he is just cherry-picking politically convenient evidence, it’s worth stepping back to examine what he is saying.
It’s true that rental costs are higher relative to mortgage costs in the North but that’s also the reason why buy-to-let yields are higher: house prices are far more affordable so that it takes a smaller mortgage to buy a property.
In the South East, by contrast, house prices are driven up on the demand side by higher incomes, cheap credit and expectations of asset appreciation but rents are still limited by the incomes of renters so yields are much lower.
By coincidence, just as the prime minister was speaking, the Office for National Statistics was publishing new data on regional rental affordability t that shows the true plight of Generation Rent and the true scale of the need for affordable housing.
From this, the East Midlands and North West emerge as the only parts of the country where people on lower quartile earnings can afford lower quartile rents (with affordable defined as spending more than 30 per cent of your income on rent).
Yorkshire and the Humber, the West Midlands and the North East are the next most affordable regions but even there lower quartile rents are unaffordable for lower earners and median rents are unaffordable for median earners.
At the bottom of the affordability table, in London only higher income households can afford to let a home without spending more than 30 per cent of their income on rent.
By contrast, Yorkshire and the Humber and the North East, the two regions identified by Gove, have the lowest house prices in the country and the lowest mortgage costs as a percentage of incomes for first-time buyers in the country.
And one reason for that is that they are already building more new homes in relation to population growth than elsewhere. Savills estimates that over the last decade the population of the North East has grown by 1.3 new people for each new home built, whereas in London the population grew by 3.4 new people per home.
Levelling up might make a marginal difference in areas where the affordability crisis is most acute if it makes London and the South East less of a magnet for people looking for high-paid jobs in future but it will do nothing to tackle the existing affordability crisis.
Will Heaven, director of policy at Policy Exchange, sums up the new policy like this: ‘Don’t vastly increase the supply of houses in the south-east, perhaps, but aim to reduce the demand for them with higher rates of building in the north. The fact that there are far fewer northern Nimbys than there are in the south – so less of a political battle ahead on this – surely seals the deal.’
If the political battle seems to be almost over , the battle over affordability is about to get even more acute.
Gove did make some encouraging statements about the value of social housing but, with the spending review weeks away, could there be a temptation to ‘level up’ funding for affordable housing too?
The Conservative conference has been full of breezy assurances that petrol queues, empty supermarket shelves and slaughtered pigs are evidence of a broken economic model that can be fixed if only we transition to a high-wage, high-productivity economy.
The new strategy for ‘fixing the broken housing market’ may be politically convenient but it seems about as likely to work as those same pigs learning to fly.