Alex Morton is Senior Research Fellow for Housing & Planning at Policy Exchange.
Housing policy is failing. There is no other way to describe it. We built just over 100,000 homes last year and it is likely to be even lower this year. The Barker Review argued as a minimum we need to build 250,000 homes a year. Meanwhile our homes get smaller and less attractive over time – the reverse of every other good or service. We set out our analysis and predicted that housing would stall in our Cities for Growth report. Depressingly, this has come to pass.
The shortage of housing induces a great deal of wishful thinking. On the right – immigration reductions could solve it. But as a House of Lords report noted, just 7% of recent price rises are likely to be due to immigration. On the left – more effective use of stock (i.e: forcing old owners out of their homes). But this is both morally repulsive and practically impossible. Other red herrings include the 1% of homes that are long term empty; worth bringing down but hardly a long term solution.
Kick-starting house-building is easier said than done. The Treasury has fallen time and again for false solutions pushed by big developers. If Government guarantees land purchases by big developers, this supports a broken model of over-leveraged land purchase that will implode again if there is another major credit crisis (and end up with taxpayers footing the bill). If Government simply hands over the green belt to big developers it will create a backlash that will set reform back decades (and not necessarily deliver more homes as developers land bank there or elsewhere). We must alter the way land flows through the system as soon as possible to insure against future credit turmoil, moving to a model where developers are insulated from shifts in land prices.
Government needs to reform the planning system and developer models. People oppose housing because a) new homes near them are rarely attractive b) new homes near them impose costs without benefits. If you don’t tackle these issues politics won’t let you build more. Developers hoard land because a) planning takes years and b) in our restrictive system land tends to go up in value. If you don’t tackle these issues economics won’t let you build more.
The tragedy is there are so many short term ideas that could rapidly build more homes. Selling off vacant expensive social housing stock would pay for more social homes. On brownfield land amending our overly restrictive change of use rules could convert empty commercial buildings into homes with minimal political difficulty. We need to begin moving to a new system. Land auctions or other mechanisms could compensate those close to development to help increase support for new housing, and quality control by local people rather than bureaucratic diktat is essential. By showing developers we are reforming the current system land banking will move from an optimal strategy to a definite negative and this will unlock sites faster and more safely than any Government guarantee.
If we are to build on green belt sites, and in many areas there is no other option, this must be strictly controlled. Direct local approval, new open public spaces, compensation for those nearby, and a maximum development of 50% of any area to keep adequate green space are critical. New quality controlled self-build suburbs for local people are more likely to be popular than big developer estates. Ministers should show reasonable NIMBYs they will have control over the changes in their area – not attack them. NIMBYs are often just reasonable people worried about the quality of their neighbourhood. With just 2.4% of England ‘concreted over’ and 6-10% developed (including all gardens and parks), Ministers must show turning over 2-3% of our least attractive farmland to development and green spaces is better than all new homes built on gardens and urban greenery.
Housing needs change. Most of all, we urgently need a Cabinet Post for Housing and Planning with a new Department; using existing DCLG staff and buildings but focused 100% on this issue rather than having to please councils and housing bureaucracies. This is not about personalities but institutions.
Since housing was downgraded from Cabinet in the 1970s housing numbers have steadily fallen. If the Coalition is serious about more homes they need to act swiftly and appoint a Secretary of State to focus on politically acceptable and economically viable ways to build more homes and increase the quality of what we build, not just pleasing big developers or councils. Housing and our economy are at breaking point. If the Coalition does not grasp these issues, Conservative MPs and the Daily Telegraph should consider what reform under an Ed Balls controlled Treasury will look like.