Lord Flight was Shadow Chief Secretary to the Treasury from 2001-2004 and led for the Opposition on the FSMA.  He is now chairman of Flight & Partners Recovery Fund.

Screen shot 2013-07-29 at 06.42.41Back in the 1930s, Neville
Chamberlain, as Chancellor of the Exchequer, succeeded in turning round the UK
economy from 1933 to 1940 with growth rates averaging 4 per cent a year– the highest in
the 20th Century.  His initial
policies were to slash public sector pay and then cut taxation; but his most
important generator of growth was a house building boom.  For virtually the first time, ordinary people
in Britain were able to afford to buy their own homes – most frequently,
comfortable three-bedroom semi-detached houses. 
This continued through the Macmillan years after the War, reaching its
greatest success under Prime Minister Thatcher with council house sales
(interestingly, initially recommended in the Geddes “axe” reports back in

It is a travesty that, today, with
slack in the economy, there is but limited scope for house building to be an
engine of growth – essentially, because house prices are far too high.

As Allister Heath has pointed out
so well
, the biggest cause of pricing people out of the housing market is our
inane planning rules, which conspire to limit supply, especially in the more
prosperous London and South East, turning home ownership into an expensive
luxury.  It is not just planning
“rationing” which limits the supply and raises the prices, but also the hidden
taxes which have grown up in the name of communities sharing in planning
gains.  There have long been levies for
local government to grab parts of the planning gain and schemes to get
developers to pay for social housing, schools and roads as part of securing
permission for private housing projects. 
The Community Infrastructure Levy (CIL) is merely the latest property
stealth tax.

The combined effect of all this is
also to make land banks an attractive investment as they keep going up in value
because of the artificial scarcity, reinforcing the rationing of supply. My two particular “bitches” are the
impact of the huge, higher stamp duty rates introduced by the Brown Government,
impacting on an increasing amount of relatively ordinary housing in London and
the South East; and the planning obsessions of many local authorities as to how
people can renovate the inside of their houses, adding substantial costs to
home renovations.

New buyers not only have to save
for the 20 per cent deposit, but also substantial, irrecoverable stamp duty
expenditure.  Not surprisingly, for those
already owning a home, it is better to dig out the cellar or add another floor to the
roof,than incur the large lost stamp duty expenses of moving.  For those whose job requires them to move,
increasingly their only options are to rent out their existing home and rent
somewhere where their job moves them, or to leave their spouse and family
behind and return home at weekends.  When
Norman Lamont was Chancellor in the early 1990s, he suspended stamp duty in
order to stimulate the housing market.

I have also been horrified by the
hassle and substantial expenditure which two of my daughters have incurred in
seeking to renovate and extend small houses in London Boroughs – one
Conservative and one Labour – worst of all are the Stalinist dictats of junior
planning officers as to what they may or may not do in improving the interiors
of their houses.  I am not talking about
fancy, Grade I listed properties, but ordinary, mid-Victorian terraced
houses.  I would be one of the first to
support maintaining a common period exterior to houses, particularly as
regards, for example, windows.  But I do
not see it as the role of planning officers to lay down the law to the last
detail as to what people can do in terms of modernising and improving the
interiors of ordinary homes.

Unfortunately, I fear the
Coalition’s funding for lending and help to buy policies will end in tears as this
also serves to drive up prices.  What
will happen when, on the back of £380bn of quantitative easing money printing, higher inflation
and much higher interest rates come round in due course?

Exclusive, central London is its
own international market in which all but the rich are now priced out, with
wealthy foreign buying now accounting for some 60 per cent of sales.  But rich foreigners are not buying outside
the exclusive centre where, nonetheless, house prices have risen beyond the
reach of most people.  For many,
particularly the young, it is arguably sensible to rent until settling down
into a career and having children; but burdened with repaying student loans and
trying to save for retirement, even in their thirties, far too many buying their
own home is now beyond their financial ability.

The tragedy is that having led the
world in home ownership for ordinary people, a subsequent mixture of misguided
planning, good intentions creating artificial scarcity, over-bearing planning,
development gains stealth taxes, and growing environmental costs have “blown”
home ownership in Britain for too many of the rising generations.