8 May 2018

How to fix the burning injustice that is Britain’s housing market

By George Freeman

Affordable housing is one of the key policy challenges of our time. But as with so many other major policy problems, we face a continued lack of imagination that leads many to think that the housing crisis can be solved with more of what worked last time, commanded from offices in Whitehall.

This is not 1955. We need new thinking, and new approaches. In particular, we need to recognise that rural and urban areas face very different challenges and need different solutions.

In rural constituencies like mine, the way to unlock new housing is to incentivise councils and communities to build according to local need, not national targets, and to keep the tax revenue from new homes to invest in local infrastructure. If we just continue to fuel demand and incentivise the high-volume house dumping that too often passes for development, we will not solve the problem.

We must be clear about the scale of the challenge. Nowhere is the breach between the generations more profound than in housing. Housing was right at the heart of that post-war, Macmillanite model of growth: the idea that each person will be better off with the promise of owning a home as their principal asset.

The post-1980s house price boom, South East nimbyism and the Great Crash of 2008 brought that dream to an end. But to recover that ideal we must now seize the moment and be truly bold.

To be fair, we have already made a start. As the Chancellor set out in the 2017 Autumn Budget, the only sustainable way to make housing more affordable over the long-term is to build more homes in the right places.

The housing supply has increased to 217,000 by 2016-17, and further measures were announced in the Autumn Budget to raise the housing supply by the end of this Parliament to its highest level since 1970s, on track to reach 300,000 per year. Equally, £15.3 billion of new financial support for housing will be made available over the next five years, bringing total support for housing to at least £44 billion over this parliament.

The Government will aim to provide 225,000 units through the Affordable Homes Programme up to 2021, and the Chancellor set out a funding increase to £9.1 billion for affordable housing.

But we must not fool ourselves. The real work must still be done. That cannot just mean incentivising the big housebuilders to build mass commuter-housing around the South East. We have tried before.

The old idea of suburban living – two cars, endless traffic jams – is an out-of-date 1950s model. Today, the younger generation want to use public transport, work flexibly and embrace a much healthier lifestyle.

For the last 20 years, long before becoming a Member of Parliament, I have argued that our planning model is broken. The developer-led model, enshrined in the 1940s Planning Acts — in which the planning system simply sets out which areas cannot be developed and areas where it is recommended by the council as a guide for applications for developments which are led by developers — is not really a planning system. It is a development application control process.

Ultimately, for high density housing and high quality development, we need to move to a system which is “plan-led”, whereby the elected representatives of communities put together a vision for their town, covering planning, infrastructure, and other elements, including social care, and then approach developers to build it, rather than the other way round.

In the 15 years before I came to Parliament, I was building businesses in East Anglia and helping to develop the Cambridge cluster. In the Cambridge cluster, housing is seen as the most urgent issue of, and for, the local economy. But quality and sustainable housing is being held back by woeful infrastructure, endless top-down “initiatives” from Whitehall to boost supply, and a lack of local government and private sector leadership.

I used to be on the board of the Greater Cambridge Partnership, helping put together a private sector-led vision of how the greater Cambridge cluster should develop, and saw the problems first-hand. The lessons were simple and remain so: lack of real local leadership, and freedom for local council leaders and businesses to build what is needed. The Cambridge cluster could have used the £1 billion City Deal to raise a multi-billion-pound infrastructure bond but was not able to do so.

Along the Cambridge-Norwich corridor, thousands of new houses have been dumped in our towns and villages along the roads, while the railway line is neglected. Our roads are being turned into car parks and we are building exactly the sort of unhealthy, 1950s living – high car use, commuting, sedentary lifestyles – which in turn is fuelling the obesity and diabetes time bombs, and increasing pressure on local public services.

The truth is that long-term infrastructure investment has been one of the great failures of the post-war years in Britain. For too long, infrastructure funding in the UK has been the preserve of central government.

The privatisations of the 1980s did much to open up the monopolies, and unlocked massive investment in some areas, but road, rail, and energy infrastructure have remained in the hands of Whitehall quangos or a few big companies wholly reliant on Whitehall. As a Member of Parliament, I see first-hand the stall cycle of local areas left lobbying for Whitehall infrastructure spend, instead of having given the freedoms to get on and build the infrastructure we need.

For inspiration, we should look back to our Victorian forebears. The genius of the Victorians was to finance the infrastructure through the profits they made on housing. They blazed a trail in the second half of the 19th and early-20th centuries with a massive wave of infrastructure investment which still shapes much of the modern landscape – the towns and cities, roads and railways, utilities, universities – we know today.

That is why I have long been calling for the Government to look at facilitating more new towns, mutual Infrastructure Companies, and Local Bond finance models. In the Eastern region, for example, we could build a new town on the Cambridge-Norwich technology corridor.

So how do we achieve the necessary investment and leadership to unlock this model of affordable housing?

First, we must be much bolder and think of new models like creating debt-free, asset-backed, real economic engines of growth to invest in. Let us create a new generation of building societies locally, and give them the power to raise infrastructure bonds to invest the private sector billions we need for new high quality housing spread around a network of fast rail, road, and broadband links. Let us liberate our Mayors and let them also raise a bond in the private market.

Second, let us sort out the Labour Party’s botched nationalisation of the railways and explore the potential of reintegration of the rail track and train operating businesses, granting 20-year franchises to run integrated local rail networks.

At a stroke, we could create major sustainable businesses of FTSE 100 standing, capable of raising finance in the capital markets to invest in UK infrastructure and growth. A new system of “Mutual Rail”. This is especially relevant to East Anglia and the South West, which lend themselves naturally to it. If an economy that works for everyone is going to mean anything, it must also mean giving people a stake in the growth. Why not let season ticket holders own shares?

Third, the time for talking about things like building on public land are over. We need tax breaks for companies and councils who provide houses. That is why I have been calling for a new model of incentives in planning and across the public sector, so councils keep and reinvest a portion of their savings to boost infrastructure. We need measures to force companies not to landbank, and look at ideas like compulsory purchase.

Finally, instead of allowing developers to develop housing estates in our villages, why do we not build some more new towns and commutes within the railway infrastructure? There are 52 railway stations across East Anglia. Most of them are woefully underused, often with large areas formally owned by Network Rail that are now redundant. They are the perfect place for 20 or 30 flats with a small supermarket, and a local café, shops and business centres. But that will never happen as long as no one knows who owns the land or has an incentive to do anything about it. As a matter of urgency, we need to create a simple model for railway station refurbishment.

Housing can only ever be viewed in the context of wider economies. We will not solve this problem in Whitehall. More than any other policy issue, housing needs to be locally-led by giving local areas the freedom to find and plan the housing they actually need.

Every entrepreneur will tell you to start local, with the facts on the ground. That is what we must do now. To solve the housing crisis we need local incentives to drive better development that better realises the needs of local economies. As with so many policy problems the answer is not in Whitehall. It is out around the country.

George Freeman MP is the Chair of the Conservative Policy Forum and the Founder of the Capital Ideas Foundation and the Big Tent Ideas Festival. He is the current Conservative Member of Parliament for Mid Norfolk.