You don’t expect to hear national policy being made on Reddit, and yet last week Andy Burnham did just that in an Ask Me Anything. When asked what he will do to fix the housing crisis, he pledged to ‘launch the biggest council house building programme since the post-war period’ and that ‘nothing else will fix it.’
It’s a great soundbite, but it’s shoddy economics.
Let’s start with the basics. A social rent home in England charges an average annual rent of £5,942 a year. Just operating and maintaining the average social house costs £6,280 a year. Rent comes close to covering operational costs, but it will never cover – or even begin to chip into – the cost of building the house in the first place.
These numbers are even worse in London. The average London social rent property rents for £7,380 a year, but costs £8,720 a year to operate and maintain. That means that each London social rent home never recovers its initial capital investment, but instead actually creates an ongoing liability of £1,340 a year.
The UK has the fourth-highest share of social housing in the OECD, more than double the EU average
What’s a terrible deal for the taxpayer is a great deal for the tenant. The average private rent in England was £16,500 last year. So being on the social rent saves the tenant over £10,000 at the implicit cost to the taxpayer. In London the saving is £19,000 a year, which means a social tenant who receives their home at 25 will receive a lifetime subsidy of over £1,000,000. You can see why Andy Burnham’s pledges appeal to some.
The implicit line of thinking throughout Burnham’s pledges is that because of Right to Buy, the UK has a dramatic shortage of social homes. This simply isn’t true. Yes, Right to Buy meant stock left the social rented sector, but it wasn’t demolished. The same families that lived in those homes before still lived in them after the transaction. And then afterwards the families were free to decide on their future housing arrangements rather than being stuck in less than ideal housing for their needs.
Even after Right to Buy, the UK has the fourth-highest share of social housing in the OECD, more than double the EU average. Where the actual shortage is simply in the total number of homes. Britain is 6.5 million homes short compared to the Western European average per capita. Trying to close that gap by spending an average of £251,000 to build new social homes would require over £1.5 trillion in taxpayers’ money.
Here’s a better idea, why not simplify the regulatory environment to allow homes to be built privately to cover the massive demand. The Centre for Policy Studies and Onward have just launched our report into exactly that with Fixing London Housing.
In 2024/25, London’s housing starts fell to just 4,170, while its population grew by nearly 100,000. The capital has been a cornerstone of the UK’s economic recovery since the 1980s, but its inability to build is squeezing rents and house prices higher and stopping people from moving to London in search of opportunity.
A large reason why starts have fallen so much is the role of government has grown, with expensive regulations like the second staircase rules. That alone costs 294 times more than the expected benefits it provides. Getting the government out of the way, rather than being a focal point will help. Slimming down the 500+ policies within the London Plan, removing restrictions around what land can come forward such as single-storey industrial estates near tube stations, and encouraging more conversions and extensions.
There is also a positive role for the government to play too, where Burnham should be channeling his energy. Development corporations in strategic areas like the space between the City and Canary Wharf, the Old Kent Road where the Bakerloo line extension will run, and Old Oak Common can oversee the building of new neighbourhoods and opportunities.
Likewise local authorities should be funded to kickstart estate regeneration projects that will densify existing estates while providing nicer flats to the existing residents. There’s little wonder why existing estate residents almost always vote in support of these projects, with massive majorities, because they get newer, larger flats.
Burnham clearly has the appetite for a large housing announcement and he’s clear that the current housing crisis is causing real pain to millions of Brits. However, his solution will just be a drain on the taxpayer, instead of unshackling small, medium, and large housebuilders to deliver homes in the places that need them the most.
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