24 August 2017

The Tories need a millennial manifesto


It might look like the young have a lot of problems facing them. They are coming of age in a world where nuclear war no longer looks like a marginal possibility. A world where robots and artificial intelligence that might rapidly — and permanently — erase their comparative advantages as humans, and with them their jobs. A world where a large minority are never partnering up and marrying. A world where traditional structures and sources of meaning like the church are increasingly marginal. But really most of these are distractions. In the West, and Britain especially, their real problems all come back to housing.

In Tokyo, or Berlin, renting an apartment in the centre of town costs less than a third of what it costs in London. And this isn’t just because London offers higher salaries. In fact, according to one estimate house prices are 5.3 times average income in Berlin — but are 15 times the average income in London. Tokyo has had no house price rises in the last 20-30 years, despite a population that swelled by three million. whereas London prices have exploded, despite the financial crisis, and even though the population only just passed its peak in 1939. Inner London still has fewer people than then.

The story of the 2017 general election was widely portrayed as a millennial uprising against an economic system tilted against them — and, on the face of it, it’s hard to disagree. Most believe that the pensions enjoyed by today’s elderly — rapidly ratcheting upwards due to the triple lock, which makes sure payments go up by inflation, average wages, or 2.5 per cent, whichever is the largest — will not be given to today’s young. And older generations got steady jobs without degrees, or had their degrees funded by the taxpayer. They got married and bought homes in their late 20s or early 30s, and could easily afford to have two or three kids. Things could not be more different now.

Things don’t need to be this way, as a new paper from Adam Smith Institute President Dr. Madsen Pirie shows. There are many small policy tweaks we could make to substantially alter the lot of the young — their futures, currently in doubt, could be made more secure. And, above all, this means reforming the housing market.

Above all, increasing housing affordability means increasing housing supply. Prominent naysayers abound, but the housing market is no less driven by supply and demand than any other market. If you think that 10,000 new luxury houses make no difference then ask yourself what would happen if we demolished 10,000 houses at the top end of the London market. Do we really think those people would just up sticks and move to New York, Paris or Hong Kong? Or would they bid up the prices — and rents — of houses lower down the chain.

The problem with increasing supply is that, for the most part, extra supply means reducing amenity for existing homeowners. More people in your area may mean more shops, businesses, restaurants and pubs. But not everything is provided by the market. When it comes to publicly provided resources like doctors’ appointments, school places, and road space more people means less for you. Despite the huge economic incentives, the housing market is unable to respond to demand with extra building because the planning system does not let it. People don’t seem to want new neighbours.

But, as Dr. Pirie argues, there are still things we can do. If councils could recoup a large part of the gains from extra houses then they could reassure residents by filling in potholes and running extra bus services. They could beautify parks and stop libraries from closing. They could even cut council tax. But current law stops this from happening — if councils want to buy land and grant it planning permission, they have to buy it at the price it’d be worth post- not pre-planning permission. When intensive farmland spikes in price from £25,000 to £1m or more per hectare with planning permission, this is quite a restriction. Dr. Pirie suggests we remove this restraint.

Densification — terraces where there are semis, and mansion blocks where there are terraces — could do the job of bringing rents down, and putting money in millennial pockets. But it isn’t happening. And nearly all (upwards of 95 per cent) of potential London brownfield sites already have plans. But under 4 per cent of London’s greenbelt would provide one million houses at trivial densities. With more ambition, we could solve housing demand for decades, even if we restricted ourselves to places within walking distance of existing rail or tube infrastructure. If not for ourselves, then let’s do it for the next generation.

If Tories think this is not their problem, they should look at voting trends. Whereas in 2015 David Cameron captured only a few percentage points fewer 18-24s than Labour, and whereas their turnout was so far below other cohorts as to make even that chunk fairly irrelevant, 2017 was different. In 2017 the gap was gigantic — 62 per cent of them went Labour and only 27 per cent Tory — and almost as many young voters (69 per cent) turned out as the overall electorate.

If the Tories want to avoid irrelevance, they must work out some way of solving the housing crisis. Their opponents won’t always be so weak. The alternative to a millennial manifesto is a losing manifesto.

Ben Southwood is the Head of Research at the Adam Smith Institute