Nida Broughton is the Social Market Foundation’s Senior Economist
Our level of house-building is chronically low compared to the growth in the number of households. That we have an affordability crisis should come as no surprise. But in recent decades, government after government has been unable to take the action required to ensure enough homes are built, often focusing instead on policies that serve to increase prices more than the number of homes. But things haven’t always been this way.
Back to the ’70s and ’30s
Projections by Government and other organisations show growth of between 230,000 and 280,000 households a year over the next two decades. The SMF’s interactive Politics of Housing timeline shows that you’d have to go back to the 1970s to find a time in England’s history when house-building was at these levels. Between 1955 and 1975, we built an average of around 280,000 new homes a year. But we’re living in very different times now. Back then, local authorities were responsible for around 40 per cent of those new homes. Now, even housing associations and local authorities combined only make up just over 20 per cent of the total builds.
We’re more reliant than ever on the private sector to deliver new homes. But to find a time in England’s history when private sector building built to the levels we need now, you’d have to go back all the way to the 1930s interwar period – a time of low interest rates and very limited planning restrictions. In 2013 we have the low interest rates, but we also have the 1947 Town and Country Planning Act.
We used to want to “get the houses up”
Given our long-standing housing problem, why have we failed to match the achievements of earlier governments to build enough houses? Given the ability of government to make it happen in the past, it is hard to escape the conclusion that the barriers are primarily political rather than economic.
To answer this question, commissioned by the National Housing Federation, the SMF looked at the history of the politics of housing over the last 100 years, analysing manifestos and academic literature, and conducting interviews with ex-Ministers and policymakers. And from this, it is clear that the politics has changed markedly. We don’t talk about housing supply the way we used to. In the 1960s, both the Conservatives and Labour competed on the number of houses they would build if elected, with both parties taking the bidding up from 300,000 to 400,000 and then 500,000 new homes a year by the end of the decade. The 1966 Conservative manifesto promised to make use of “every new method that works to get the houses up and keep the prices down”. This single-minded pursuit of more housing seems a world away from today.
Three shifts that have changed how politicians see housing
We found three important shifts that have altered the political landscape over the last 100 years.
Firstly, it is undeniable that the nature of the housing problem has changed. For much of the early and middle part of the twentieth century, new homes were needed to cope with severe overcrowding and poor quality stock, and to replace homes lost as part of slum clearances. Now, more housing is needed to meet increases in the number of households – and much of this increase is driven by changes in the way we live, with more people living separately where previously they would have lived together. In this way, housing “need” can be seen as subjective and open to challenge.
John Gummer (now Lord Deben), commenting on his time as Secretary of State for the Environment said in an interview:
“Our whole welfare system is based on the Beveridge concept of the family. We don’t know how to handle housing demand that is driven by changes in attitudes which challenge this concept, such as divorce for example. In this sense housing is wrapped up in a larger question around welfare provision, around people making decisions which they cannot afford.”
Secondly, there has been an ideological shift in how to provide housing for those who cannot afford market rents – away from investing in building social housing and towards funding through benefits. Whilst this may have some advantages – giving those on low incomes greater choice and flexibility over where to live, it has removed the public sector as a significant builder of homes. The evidence suggests that the private sector has been unable to fill the gap. And housing associations are heavily reliant on welfare payments to pay tenants’ rents: a revenue stream that is becoming less secure.
Finally, and perhaps most importantly, there has been a major change in the voter base. Homeownership has gone from 23 per cent of households in 1918 to around two-thirds today. Meeting the interests of homeowners – and the aspirations of those who want to get on the housing ladder – does not necessarily coincide with policies to increase housing supply. Surveys show that homeowners are more likely to be anti-development. This creates a dynamic of pressure to constrain supply, with the result that prices go up, and ever more people want to get on the housing ladder as housing becomes not just somewhere to live, but an asset that can be relied on.
Breaking this cycle will mean taking courageous (in the sense that Sir Humphrey might have used it) – and not necessarily popular – action on the part of politicians. There is a window of opportunity that is beginning to open. Home ownership looked unstoppable until the early 2000s. Since then, the proportion of ownership has slightly declined. A growing proportion of young people are less likely to own and benefit from house prices rises, more likely to rent, and as such more likely to be pro-development. If this trend continues, politicians will be forced to address find ways of addressing the concerns and interests of this group – and one way is to build more. But with a majority of homes still owner-occupied, especially among the powerful grey vote, the political choice is a difficult one.
The NHF, which represents England’s housing associations, asked the SMF undertake a project exploring housing’s past and present relationships with politicians to understand how to engage with them in the future. The purpose was to guide the NHF’s thinking around its Towards a Vision project, which considers what housing associations need to do over the next 20 years to adjust to what could be a dramatically different political and operational landscape.