30 November 2023

Could turning houses into flats be the coup de grâce for the Tories?


It didn’t get as much attention as the headline measures on taxation, but Jeremy Hunt announced something in the Autumn Statement which could yet turn out to be what delivers the coup de grâce to the Conservative Party – a consultation on allowing houses to be converted into flats without the need for planning permission.

As someone who keeps shouting their head off about the housing crisis, this policy puts me in a tricky spot. After all, have I not complained explicitly about the under-occupation of larger properties, for example by older people who no longer need a family home?

On the face of it, there’s much to like about the Chancellor’s proposal. Developers would be able to turn a handsome profit on such a conversion, allowing them in turn to bid more for houses and incentivise their owners to sell. Converting a house into two flats does double the number of properties available.

Even the all-important character of the local area will be preserved, as such developments will be permitted only where the external appearance of the property remains unchanged. So what’s not to like?

The fundamental problem with any measure that doesn’t involve building new housing stock is that it is necessarily zero-sum – stock of one sort of property is increased only at the expense of depleting another sort.

This pits the interests of the people who need the different types of accommodation against each other. For example, Sadiq Khan’s push to expand council housing in London consists of buying up private housing, which will only exacerbate the crisis for the majority of people stuck in the private rented sector.

Hunt’s proposal, meanwhile, will expand the supply of flats only at the cost of depleting our stock of family homes – the sort of two-storey terrace or semi that used to be an unremarkable rung on the housing ladder but is increasingly a distant fantasy for people who live and work in the capital and other places where the housing crisis is most acute.

It stands to reason that if the policy is successful in driving conversions, that will push the prices of undivided houses in areas where the policy takes off up even higher.

One can see why this wouldn’t bother the Treasury which, as I’ve written elsewhere, ‘will never understand why you would waste 18 years gestating a taxpayer’. But it ought to concern anyone who takes family policy seriously; there is something very on-the-nose about the idea of people living cheaply in spacious homes they bought decades ago, only to turn a big profit ensuring nobody has the opportunity to do the same thing after them.

There are a couple of Yimby counter-arguments to this sceptical thesis. One is that there is currently a relative shortage of one-bed flats versus family homes; another is that the housing crisis is already eroding the stock of actual family homes because so many are now buy-to-let properties and, in particular, Houses of Multiple Occupation (HMOs); a third is that in many places where the housing crisis is most acute, such as London, density is often absurdly low.

All have truth to them. Yet as a defence of this policy, they seem to conflict with each other.

For example, if density is the goal, it seems more efficient for a house to serve as an HMO – which often sees four or more people renting individual rooms in a property – than converting that property into two single flats. Any HMO so converted thus seems likely to decant a couple of people back into the market, at a time when pressure is so great that even single rooms are now absurdly expensive.

(By way of personal example: in 2021 I chose to rent a single room for £850 per month rather than a one-bed flat a couple of streets over for £1200 per month – by the time I moved out in 2023, the price of the room had risen to over £1100 per month.)

Moreover, because people in HMOs are only renting a single room in a common property, the amount of physical conversion involved is often very low, and the property remains a single unit for the purposes of ownership and sale. It could thus return to single-occupancy relatively easily if and when housing conditions improve. This is obviously also true for owner-occupied houses, the sale and conversion of which is what would likely unlock any density gains there are to be had.

That is not the case for something which has been extensively remodelled, turned into two separate properties, and sold to different people. That sort of change is much more permanent.

It’s understandable that such concerns might be secondary to solving shortages in the here and now, and perhaps they are. But the housing crisis built up over decades, and we should at least be mindful of the potential long-term impact of policy on the structure and distribution of our housing stock.

But to return to my claim at the beginning, how could this policy be so dangerous for the Conservatives? Simple – because any policy that involves turning one large home into several small ones will on average mean swapping out a few of their voters for a larger number of hostile voters.

Take a walk around the sort of urban or suburban constituency which used to be reliably Conservative in the 20th Century, as I have in Manchester and Birmingham, and a common feature is leafy streets with nice homes, each of which sport multiple doorbells now.

That obviously shouldn’t be the factor that determines the fate of this initiative. It ought to be offensive in itself that today’s middle-class workers can aspire to live in just a portion of the properties yesterday’s middle-class enjoyed. The zero-sum reshuffling of existing stock reflects a poverty mindset that would baffle previous generations.

It is nonetheless extremely short-sighted of the party not to think about the impact this could have on their vote, not just in their remaining urban seats but also across various commuter belts as the housing crisis sees angry voters priced out of the cities radiate into the so-called Blue Wall.

But then if the Conservatives thought deeply about the long-term impact of the housing crisis on their vote, we’d be in a very different place already.

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Henry Hill is Deputy Editor of ConservativeHome.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.