Alex Morton was a member of David Cameron’s Downing Street Policy Unit.
Brexit is a major challenge on many fronts – technical, logistical, political. And so it is right that the Conservatives focus attention on making it a success. But not every problem can wait until the issue of Brexit is solved. Housing is one which allows the Tories a single shot at resolving an issue that will determine their long-term survival. If by the next election home ownership has continued to decline, and people feel that it will continue to do so, the Conservatives cannot win. Evidence shows that Labour is finally mobilising private renters who are frustrated by the failure to extend home ownership to them – with social renters also generally Labour voters, particularly those who are not in work.
Last week, a building society released data showing since 2007 housing had got more affordable in 50 per cent of the country. But in 2007, we were at the peak of a bubble – and, since then, housing has become even less affordable in half the country. This is simply unsustainable. With 86 per cent of people wanting to own, falling ownership is a major source of frustration. Contrary to popular belief, we are now one of the societies with the lowest rates of home ownership in the developed world.
Without a stake in society, neither the One Nation dream of a society at ease with itself nor Margaret Thatcher’s aspirational society is viable. Both wings of the Conservative party need to realise that this is an issue that cannot wait. All policy areas take a long time to implement, but housing has a very long lead time. Reform to housing and planning takes 18 months to bring in. It then feeds through the system in a similar time period. This means that the Conservatives need to implement reforms fairly urgently if these are to make a difference in the 2022 election.
Home ownership is critical
Some people want to rent – and we need a better, more professional offer for this group – the ‘build to rent’ phenomena. This cannot distract from the fact that the Conservative Party needs to be the party of home ownership. The 2017 Manifesto barely touched on home ownership and instead promised changes to renting. This completely failed as a tactic to win over renters. In addition, figures from Eurostat show that the UK has the highest level of social housing in the entire European Union. The idea that the only way forward is to increase the level of social housing yet further illustrates lack of understanding of our housing sector.
We risk repeating past mistakes if we do not understand them
The Government has promised to reform the National Planning Policy Framework (NPPF). To do this correctly, it is necessary to understand why this framework failed the first time around. The NPPF created something called the Presumption in Favour of Sustainable Development. As I wrote at the time in Cities for Growth in 2011, this effectively recreated the system of the late 1980s, in which sites would be allowed to come through on appeal – when the planning inspectorate overrules local councils deemed to be failing on the issues of housing and land supply – to release additional sites.
This increased the number of large sites coming through the system, but it had only a limited impact on housing supply, because it required large companies to force these sites through on appeal – a costly process. In addition, the amount of land increased, but as this was through the largest sites, and developers tend to build out a large site not that much more quickly than a small or medium sized one, this increase was limited. The reforms were politically painful, but practically fairly ineffectual.
Those pushing the reforms – most of all George Osborne – saw the fact that the Daily Telegraph was up in arms at these changes as a great success because it showed younger voters were on their side. This was a mistake: younger voters tend to be more concerned with whether or not they own a home than internal Tory wrangles. I remember various internal arguments during which I was told that the reforms would ensure that housing supply would be fixed within a few years – and various journalists who couldn’t understand that I was both for increased housing supply but sceptical of the proposed reforms. Again, this time round, we should not mistake angering some voters for resolving the problems: indeed, our goal should be to maximum increases in supply for as little political pain as possible.
We will have one shot at getting the revision of the NPPF right, and to put in place wider housing reforms that will increase supply over the next few years. This makes the next eighteen months critical for the long-term future of the Conservative Party.
We also may face a downturn which may cripple supply – without raising ownership
While housing supply has increased, it has not yet even reached 200,000 homes a year in England – well below the levels necessary that need to be consistently achieved in order to stabilise house prices and rents, and reduce speculation in the housing market. But if the economy turns down, as it did in 2007-9, housing numbers risk falling roughly in half as they did then, because the system is not fundamentally different.
In such circumstances, home ownership will not rise (as lending will contract) but supply will fall, exacerbating the medium term undersupply of housing. Government needs a plan to maintain supply. This cannot be just increased housing grant: the collapse in housing numbers occurred despite a huge increase in grant to build more affordable housing (such an increase in grant is a necessary but insufficient part of any plan).
So the challenge is immense. Taken all together, the increase in housing numbers proposed last week by DCLG will not solve most of the deep rooted problems within the system – but, if other reforms are undertaken, they could act as an accelerant by increasing the flow of permissions and land. However, time is short for very complicated reforms to be put in place. We must accelerate reform as quickly as possible.