The scale of the housing crisis is sobering. Britain has the worst housing shortage of any major developed nation. Decades of undersupply have contributed to house prices and rents skyrocketing out of reach. In 1997, the average home cost about 3.5 times the average income. As of 2024, an aspiring buyer must devote nearly eight years’ worth of income to afford the average house.
Home ownership among young adults has collapsed, and millions are paying punishing rents. Between 2023 and 2024, private renters and social renters spent respectively 34% and 26% of their income on housing costs. And this isn’t just about housing; it reduces discretionary income, family formation and the promise that each individual can flourish through their own efforts.
We can craft housing policies where existing renters and owners stand to benefit too from new development
The scale of our housing shortage is so large, and the opportunities to create value by building good homes so great, that many approaches can ensure that everyone would benefit from them. Change is always hard if it creates winners and losers. But it is far easier if we can craft housing policies where existing renters and owners stand to benefit too from new development.
There are numerous examples of successful planning policies. The most ambitious one is land readjustment, a tool successfully used in countries like Germany, Japan and South Korea. This is a consent-based method to pool plots of land from different owners, allowing the land to be used more ambitiously without resorting to compulsory purchase. In practice, instead of a developer or the state painstakingly buying out each owner and facing holdouts, the owners in a defined area come together to cooperate.
An area could go from modest houses to gorgeous mansion blocks. Each original landowner is given a new property in the reconfigured site, proportional to what they contributed. The community unlocks higher-density housing that no single owner could have achieved alone. Since the redevelopment increases overall land value by enabling more homes, it benefits all parties involved.
Each scheme is subject to approval by a high qualified majority of landowners, perhaps 75%. This approach respects individual property rights while overcoming the stalemate of fragmented ownership. The ‘unearned’ land value boost from granting planning permission is distributed amongst the community, not to a single lucky developer or speculator. Such schemes can also include provisions for new parks, roads or community facilities funded by part of the land value uplift. In Germany, this is a routine way to assemble urban land and deliver well-planned, harmonious new districts rather than the sometimes uglier outcomes of more piecemeal, speculative development.
In fact, parts of Britain already employs a type of land readjustment, known as ‘estate renewal’. Many ageing social housing estates are in sore need of investment. Families may live in damp, cold or overcrowded homes, not insulated to modern standards. In the most unaffordable areas of the country, it can be possible to fund new and better homes for existing tenants by the construction and sale of private homes on those same estates. In the past, it has too often been done to residents rather than with them. Tenants and leaseholders have been understandably wary of schemes they fear may force them out.
Since 2018, London has required a ballot of the residents of an estate before renewal can begin. Many voiced concerns that this would block all development.In reality, it has led to decisively positive results, with tenants being prepared to overwhelmingly endorse many such proposals. In fact, out of 38 ballots held since then, 37 have passed, often with enormous majorities.
We can encourage this approach to redevelopment by setting national policy to support ambitious renewal schemes by housing associations, provided they are supported by the residents. We also should give tenants the power to demand renewal, or to require transfer of ownership of the estate to another social housing provider who promises to do it.
Another key reform that could make a meaningful contribution to easing the housing crisis is unlocking small-scale, incremental additions within existing neighbourhoods. This is often the fastest way to add new housing, without the ‘absorption rate’ problem of large developers who drip-feed supply into the market to maintain the price that will recoup their land and other costs.
This reform would make life easier for a family building a granny annexe so an elderly parent can live with them, or a young couple adding an upstairs flat for a new child or to rent to a lodger. This kind of ‘invisible density’ or gentle infill could cumulatively add hundreds of thousands new homes while enhancing the area. The last Conservative Government took modest steps in this direction by encouraging unobtrusive ‘mansard roof’ extensions, almost invisible from the street, in national planning policy.
There are examples of successful uptake on the local level. For instance, the scheme advanced by the Jewish community in South Tottenham in London allows for upward extensions of Victorian properties, provided that the building remains in keeping with the original designs. Similarly, 12 local authorities around the country already encourage modest ‘residential annexes’ behind an existing house, to provide a home for an elderly relative or adult child. If these are single-storey, well-designed and do not take up too much of the back garden, they are profoundly unobtrusive.
However, we should go further. We could, with careful design requirements, encourage this approach by enabling ‘street votes’ that would let local residents themselves permit additional improvements on their street, subject to careful protections for neighbouring streets.
We need to deliver a future where more homes are built with communities, not against them – a future in which Britain’s housing dream is rekindled for the next generation.
This is an extract of an essay from a new book, ‘Liberalism Liberated’, published by Bright Blue.
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