21 October 2017

Does Britain really want to solve the housing crisis?


Whatever numbers you look at, the scale of Britain’s housing problem speaks for itself.

Take housing affordability. Twenty years ago, house prices were twice average incomes for a first-time buyer. Today the ratio is five to one. In London the problem is twice as bad, with a ratio of 10 to one.

There are now more outright homeowners than there are mortgage holders in Britain. And there’s the highly regressive fact that, according to one estimate, an astonishing 25 per cent of all property transactions in the UK involve the so-called ‘bank of mum and dad’. These are hardly the symptoms of a properly functioning market.

There are few markets as important as the one in our homes. Housing isn’t just a basic human need; it affects countless important decisions, from whether someone will move for a new job to when they decide to have children. And, at present, the supply of this all important resource plainly isn’t working in Britain’s socio-economic best interests.

Theresa May appears to realise that the case for doing something about housing is unanswerable. In her party conference speech she lamented the fact that “for many the chance of getting on the housing ladder has become a distant dream”, and dedicated her premiership to “fixing this problem – to restoring hope” (before proposing some rather feeble policies).

Conservatives see a neat alignment between what is best for the country and what is best for their party. Sort housing out and you’ll persuade younger voters that the party – and the economic system it is supposed to defend – aren’t so bad after all. “You aren’t going to support capitalism if you don’t have any capital” is a refrain you often hear in Tory circles these days.

But is it that simple? I have a sneaking suspicion that the politics of housing is more complicated – and that the political prize that Conservatives assume awaits them if they tackle the issue could be something of a mirage.

It all boils down to what young voters really mean when they say housing affordability matters to them. Do they mean they want to restore sanity to the housing market; to bring that house price to earnings ratio down and for it to stay down? Or do they mean they want what their parent’s generation had – the chance to get rich by effortlessly riding an extraordinary surge in house prices?

I suspect that for a lot of people their motives are mixed. Sure, they’d like to get a foot on the housing ladder. But what they really want is to jump on the housing escalator, the something-for-nothing trip that the previous generation enjoyed.

If this is the case, Generation Rent might not actually want the housing market to be fixed. They just want to be one of the lucky ones.

Housing affordability, after all, is a zero-sum game: falling prices hurt homeowners to the exact extent that they help those priced out at the moment.

So for our politicians, the problem is that as soon as someone benefits from a policy introduced to lower the cost of housing – liberalising Britain’s strict planning rules, for example – their economic interests instantly become exactly opposed to whatever government has done to make homeownership affordable. And so the party that helped someone buy a house might not see their votes.

None of this is to say that the Government shouldn’t take action on housing. It does mean that the political sales pitch that goes with it is a difficult one. It would be tempting to sell to voters the idea that they too can get rich off ever-rising house prices. The hard truth is that is unsustainable. The politician that explains that to voters is a brave one. But the housing crisis cannot truly be solved until someone does.

This article is taken from CapX’s Weekly Briefing email. Sign up here.

Oliver Wiseman is Deputy Editor of CapX