Chris Philp is MP for Croydon South.
When it comes to house prices, we all know the statistics. Since 1991, the proportion of 25- to 34-year-olds who own their own homes has dropped from 67 per cent to 38 per cent. In London, house prices are 12 times the average salary. The typical first time buyer takes a decade to scrape together a deposit.
There is a very simple explanation for this: we aren’t building enough homes. The Government has made admirable efforts to stimulate housebuilding after the collapse in 2009, with home starts up by 70,000 a year since then. Yet the cumulative undersupply over the last 20 years – the gap between the number of houses we’ve built and the number we need – has reached at least 343,000 units in London, and another 96,000 in the South-East.
But the problem isn’t just how many homes we’re building. It’s who they’re going to.
In her very first speech as Conservative Party leader, Margaret Thatcher set out a vision of the “property-owning democracy”. But that dream is now in danger. It’s not just twenty-somethings who are being priced out of the market. Home ownership rates have reduced for everyone under the age of 44 – precisely the tipping point, not so coincidentally, at which the electorate switches from being majority Conservative to majority Labour.
Home ownership is the cornerstone of our society. And it is a great deal. Once capital repayments are discounted, those who own their homes devote a vastly smaller share of their income to housing costs. Even if you include those repayments, you are still better off.
In fact, in my new report for the Centre for Policy Studies, Homes for Everyone, I show that over a 25-year period, an owner will end up better off than a renter under any conceivable conditions. Even if there is zero real house price growth, and the stock market bounds along at eight per cent a year, the owner still beats someone who took their deposit money and invested it in the FTSE. As soon as you plug any kind of growth in house prices into the equation, the gap widens to the hundreds of thousands of pounds.
So what can we do – beyond what the Government is already doing?
The truth is that we do not need to concrete over the green belt, or build in unsuitable areas, to get housebuilding back up where it should be. My report sets out a series of reforms to speed up planning delivery. Letting developers pay more for faster planning approval. Merging the Community Infrastructure Levy and the Section 106 agreement, and eliminating the affordable housing requirement for small developments, which results in endless delays and arguments and relatively few cheap homes. Bringing in “Pink Zones” – already proposed by the Centre for Policy Studies – in which development in derelict or run-down areas is automatically approved as long as certain basic conditions are met.
One of the unsung success stories of this Government is the disposal of public land programme, overseen by first Francis Maude and then Oliver Letwin. Between 2011 and 2015, enough land was released for 93,850 homes – 23 times the average under Labour. But we could do far more: the NHS alone sits on enough surplus land for more than 500,000 homes, let alone Network Rail or the MoD. We need a turbo-charged disposal programme with direct prime ministerial oversight – and for housing to become a Cabinet-level post, for example by renaming and refocusing the DCLG as the Department for Housing and Local Government. This is exactly what Churchill did with Macmillan, giving him exactly the same target as today – 300,000 homes a year. Supermac hit the target a year ahead of schedule.
But it’s not enough just to build more houses. We need to make sure young people can buy them.
At the moment in Britain, too few first time buyers people are getting on the housing ladder. Too many properties are going to buy-to-let landlords, non-UK-residents, and second home owners.
In terms of foreign buyers, in particular, we think of this as a Central London problem – Arab princes snapping up flats in Knightsbridge, or Malaysian buyers getting first dibs on the new luxury flats around Battersea Power Station.
But recently, I found out about a development in Orpington, of starter flats priced at around £300,000. Only one of six properties I heard about had been bought by a Briton. The others had sold, off plan, to buyers from China, Hong Kong and Singapore. It is a similar story in Elephant and Castle, where the first 51 units of a regeneration project went overseas. Or Hounslow, where in a 250-flat office-to-residential conversion, at an average price of £225,000 per flat, a full 75 per cent were sold off plan in the Far East. The same is true in Manchester, or Edgware, or many other places. The chairman of a FTSE 250 builder told me that 50 per cent of his private sale homes in London are now sold overseas, often without even being offered to British buyers.
The Government has attempted to help first time buyers by imposing a three per cent stamp duty surcharge on buy to let and second home purchases, which has restrained the growth in such purchases without notably affecting transaction volumes. And the recent Budget announcement of stamp duty cuts for first time buyers is a very welcome development too.
But we can go further. Let’s use the planning system to make every single new socially or below-market rented home subject to “Rent to Buy”, where tenants can buy more and more of their property over time while paying less and less in rent.
And we should also bite the bullet, and copy the many other countries – almost all of them admirable free market economies – that favour domestic buyers over foreign. In particular, in developments of more than 20 units, at least half of homes should be reserved for those living and paying their taxes in the UK.
Some people may say that this is interfering in the market. But the housing market is already controlled via the planning system – and home ownership is so overwhelmingly important that it is our duty to promote it.
As well as being overwhelmingly important, home ownership is overwhelmingly popular. It is what a staggering number of our fellow citizens – 86 per cent – want for themselves. It is a good deal economically – providing the most secure form of tenure, as well as an asset that can cover the costs of care and other expenses in old age. It is what we, as Conservatives, should do everything in our power to promote.
This Government has already done much to deliver on housing, and will do more still. But if we cannot halt the decline in home ownership, if we can’t give our young people the homes they need and deserve, then in desperation they may turn to Jeremy Corbyn for another solution. So let’s make this a country that works for everyone – by getting Britain building and owning.