James Olney works in public affairs for Interel. This article is written in a personal capacity.
As a country, we face a housing crisis of generational proportions; as a Party, we face one with wide-reaching electoral implications.
Access to and ownership of decent housing is the fundamental basis for much of any individuals stake in society, and is a crucial driver of Conservative voting intention – and, far more importantly, it also underwrites the quality and security of life for so many of us across the UK.
For many young people, it’s a goal that is increasingly out of reach, and I see limited sign of the Government grasping just how profound a catastrophe we are accelerating towards.
That’s why it’s no surprise that the Chancellor’s recent announcements on housing were, at best, anaemic. Underwriting the risk of five per cent deposit mortgages does nothing to tackle the very real supply issues within the housing market. And – if anything – extending the Stamp Duty holiday only helps to spur the vastly overinflated value of properties long since out of the reach of any reasonable young person seeking to get on the housing ladder.
The latter measure is a clearly intended injection of stimulus into the housing market to keep it ticking over. Stamp Duty forbearance cannot last forever: the Government simply cannot afford it. The only good thing about the housing bubble is the immense tax receipts it returns to the Treasury, and the sooner they return, the better.
The former initiative – underwriting the risk of five per cent mortgages – is far more problematic, and paints a difficult picture of the Government’s understanding and commitment to tackling the crisis at the bottom of the housing market.
For many young people facing a long climb up the housing ladder, it’s impossible to ignore that the housing market, as currently constituted, has hit a huge, problematic brick wall – with over-regulation (both in the planning and financial systems) choking housebuilding and access to mortgages, while under-regulation has simultaneously destroyed the integrity of much of the affordable housing stock, further compounding the supply issue.
You cannot fix these very real structural issues by just propping up unsustainable levels of credit. If people cannot afford any more than five per cent of the cost of the average home – and if the risk of lending in such circumstances is so prohibitively high that banks will not do it unless Government guarantees the funds – then that says something far more damning about the state of the current market.
It is a fundamental principle of conservatism that markets should be allowed to survive and thrive on their merits. It would be a reasonable criticism to suggest that the housing market is too valuable and too strategically important to be allowed to fail, but that does not discharge the Government of its fundamental obligation to make sure that it works.
Ministers cannot simply continue to perpetuate a broken system because of the painfully obvious but so often unspoken political risk implicit in reforming the market: Conservative support (in a gross but functional simplification) rests with the landlords and not with those at the mercy of the leasehold and rental markets. The short-term pain clearly clouds the urgent requirement for a long-term fix.
Much worse than doing nothing, though, is encouraging the unsustainable growth of house prices. A vital element of a property-owning democracy – a principle that every government since Thatcher has supported – is that owning property must be achievable. Doing so gives homeowners a stake in society, a capital investment in the prosperity of their area and ultimately of their country. It’s not for nothing that there exists a strong correlation between home ownership and Conservative voting – with a material benefit and risk from macro-economic decisions, people suddenly become much more risk-averse.
But on the ground, quality and quantity are depreciating to the point where decent home ownership is out of reach for a generation. Without that stake in society, the Conservatives risk stifling their vote potential in the age groups that – before you know it – will be deciding elections.
This is exactly the crisis that the Stamp Duty holiday exacerbated in the midst of the pandemic – it’s an indictment of the lack of any strategic direction that the measure spurred house prices to their highest level ever. The rationale – or moral justification – is that by encouraging upwards mobility in the housing stock, by making it cheaper to upsize, greater capacity is created at the bottom of the supply.
Such an approach might work if the wider financial circumstances were reasonable – but in this case, all the economic activity did was to continue to inflate average prices while doing nothing to alleviate the demand pressures at the bottom. Solutions must come from supply side resolutions.
Instead of fiddling around with marginal financial measures, or actively detrimental fiscal forbearances, the Government must embrace that the Covid crisis will, out of necessity, reset much of our public and economic policy. There is a vital opportunity for the Government to articulate a real, bold plan for housing as part of the recovery.
For its faults, our system has considerable potential. But it will take meaningful strategic guidance and financial assurance from Government to harness the muscle of the huge private housebuilding sector to guide the development of housing on a scale that unlocks and services a level of demand that is only going to grow.
Unless Ministers confront this difficult reality, acknowledge it and take the tough macro-decisions on the future of our housing system now, the path ahead consists of forced capitulation, one thing at a time. The Government should look to Macmillan – the last Minister to meet his public housebuilding target. Anything less leaves a political, policy and social sore that is not going away.