they are bad for many young families desperate for more space, and they are damaging to the wider economy. A housing stock that is becoming ever more expensive overall, and which is not located where it is needed, results in sharp divergences in the distribution of wealth and opportunity between generations, and between those living in different areas. To create a fairer and less harmful housing market, a combination of strong central direction about housing supply and unpopular taxation changes would be required. But politicians find it hard to grasp these nettles: there is far too much short-term pain and the gain will go to their successors. It is easier for them to carry on with somewhat ineffective knee-jerk and populist help for first-time buyers.
We need to have a clearer analysis of the choices, particularly with regard to the environmental issues. The word ‘sustainability’ needs a national focus – it cannot be fully assessed locally. Are there actually serious environmental or social costs to developing more homes in London and the South East, and, if so, what would the economic cost of a different distribution of population be? The values and trade-offs implicit in planning policy should be made more transparent. We protect open land now by paying a very high price for the space for housing – but this trade-off is rarely explicitly discussed.
We should accept that the housing market cannot be made perfect. This book will suggest criteria for judging what a better housing market looks like. But these criteria can conflict, and people will come to different conclusions. Some would regard more new homes around the economic hot spot of Cambridge as a success, for example, while others would view it as environmentally damaging.
I have become less convinced that it will be possible to build enough to meet demand in much of southern England, given the strength of local opposition in many places. So building more housing will not be the only answer. We will also need to ameliorate the consequences of demand continuing to exceed the available supply.
What policies are needed now? The proposals I set out include the following.
•A clear view in government of environmental and social costs, influencing spatial planning at the national level, and leading the debate about where new towns are placed and about major urban extensions.
•A strong national influence over local planning decisions, in part to ensure better cooperation between local authorities. But a further radical reform of planning now would be unhelpful.
•Much vacant land is in the hands of public bodies. We need to get these sites into use, which may include a greater role for local authorities in buying and preparing sites.
•Financial compensation for those adversely affected by new development.
•The introduction of capital gains tax on main residences, among other tax changes.
Finally, the big impediment to this kind of package is that housing policy is currently split among several government departments and independent regulators. Some roles should be consolidated, and priorities clearly identified. If we cannot have a unified approach to the proposals set out above, housing market policies will remain incoherent and the housing crisis will deepen each year.
Acknowledgements
I am very grateful to the many people with whom I have discussed housing issues over the last decade, particularly Paul Chamberlain, Paul Cheshire, Kelvin MacDonald, Steve Nickell, Henry Overman, Pete Redfern, Lord Matthew Taylor, Robert Upton and Christine Whitehead. I am also indebted to Diane Coyle for giving me the chance to think all this through again and to Sam Clark for being such a supportive editor.
Chapter 1
What outcomes do we want?
Since the financial crisis of 2007–9, discussion of a ‘housing crisis’ has been growing and a range of policy responses have been put forward. For example, the mortgage guarantee scheme introduced in late 2013 as the second part of ‘Help to Buy’ was intended to help kick-start sluggish housing transactions, while the so-called bedroom tax introduced in April 2013 reduced housing benefit for those with spare bedrooms in an effort to cut the growing housing benefit bill. By mid 2014, the primary concern was the overheating market in London and its hinterland. But these policy responses and debates don’t effectively tackle the big underlying issues that have emerged over recent decades, including a widening gulf in wealth between those in owner-occupation and those out of it, and the resulting concerns about inequality between generations.
Governments are rarely precise in how they measure their success with regard to the housing market. In 2007, the Labour government summed up its aspirations as follows:
We want everyone to have access to a decent home at a price they can afford, in a place where they want to live and work.2
It would be possible to measure the success of the first part of this goal, but the second part may not even be feasible.
The housing goals of the 2010 coalition government, as stated on the website of the Department for Communities and Local Government, have varied. The 2013 version included ‘helping more people to buy a home’, which might imply that one criterion for success would be a higher rate of owner-occupation. This has been an implicit or explicit policy goal for governments of all persuasions since the 1970s. But many other goals are pursued by governments, including managing house price inflation if it signals an unsustainable boom, or not building on green belt or environmentally sensitive land. Achieving success in terms of any of these aims requires (among other things) some myth busting.
Is more home ownership desirable?
Long-term policy support for home ownership has been quite successful. The share of owner-occupation in England rose pretty steadily between 1961, when it stood at 44%, and 1991, when it reached 68%. That level changed little until the financial crisis. So, while in 2001 the share of owner-occupied households reached 70%, after 2007 that share fell, to 64% by 2012. Table 1.1 indicates that the rise in owner-occupation in the 1960s and 1970s reflected a move out of the private rented sector, whereas in the 1980s and 1990s it was the share of social housing that fell. The post-crisis fall in owner-occupation has been offset by a move back into the private rented sector: its share has risen from around 10% in the early 2000s to over 18% in 2012.
Table 1.1. Changes in share of household tenure (England).
| Owner-occupied | Social rent | Private rent | |
| 1961 | 43.9 | 24.5 | 31.6 |
| 1971 | 52.4 | 28.3 | 19.3 |
| 1981 | 58.4 | 30.5 | 11.1 |
| 1991 | 67.6 | 23.0 | 09.4 |
| 2001 | 69.7 | 20.2 | 10.1 |
| 2007 | 68.0 | 17.7 | 14.3 |
| 2012 | 64.2 | 17.3 | 18.5 |
Source: Department of Communities and Local Government.
Myth 1The UK has an unusually high rate of owner-occupation
In 2012, among other EU countries, only Germany (53%) and Austria (57%) had an appreciably lower rate of owner-occupation than the UK, according to Eurostat figures. In both Italy and Spain the rate is around 75%. However, the proportion of owner-occupiers in the UK who have a mortgage on their property is comparatively high and we still have a somewhat above-average proportion of households in social rented housing. The share of the private rented sector is a little lower than the EU average (notably, Germany and the Netherlands have bigger private rented sector shares).
It is argued that a high level of home ownership leads to better care of the housing stock, and more commitment by households3
