23 January 2023

Tories must stop telling themselves comforting lies about the housing crisis


There is a housing crisis in Britain. That reality is undeniable. At least you would think it is.

Just a cursory glance at some of the basic facts should make this abundantly clear. In the 1960s we built 3.6m homes, while in the 2000s and 2010s we built around 1.5m homes a decade. Even as the growth in stock has been declining, demand has been increasing. The last decade in particular has seen a sharp increase in population (largely fuelled by immigration) and a continued fall in housing supply. This is a complete reversal of the levels of housebuilding relative to population compared to previous decades.

This shows in the affordability of housing. Since the 1970s there has been a 207% real terms increase in house prices. Meanwhile, real wages have more or less stagnated. 

Not only is homeownership increasingly unaffordable but so too is the price and quality of renting. As with house prices, rent is outpacing both wages and inflation leaving people with little or nothing in their pockets at the end of each month after rent and bills have been paid. Not only this, but the size and quality of rental properties has been falling. 

All of which means home ownership has also become harder to achieve, especially for young people. Despite nine in 10 Britons saying they want to own their home, ownership rates in the UK are now fourth from bottom among European nations, reversing nearly a century of progress toward greater ownership. 

The result? Young people are turning away from the Conservative party in droves. Nowhere illustrates this exodus quite like London. It’s easy to forget that the capital was once a solidly blue city; and in 1987 and 1992, the Conservatives performed better in London than they did nationally. But since the 1970s real terms house prices have increased 513% in London and home ownership has fallen below 50%.

This, along with other electoral shifts, has helped marginalise the party. Similar shifts are underway in a number of towns and cities, such as Brighton, Canterbury and Bristol, where homeownership is becoming increasingly unaffordable. In short, it is hard to sell capitalism to those with no capital. 

In response, two distinct phenomena have emerged. The first is a growing trend among politicians to claim that while there is a housing shortage in Britain, it can best be solved by building any homes that are needed far away from their constituents, or that while they support housebuilding generally, almost every local example of it is somehow flawed and must be blocked. 

The second is an argument over the importance of supply. A welcome attempt to insist upon the importance of other factors – in particular monetary policy – has transformed in some quarters into a general attempt either to downgrade the importance of supply, or even to insist that our housing stock is perfectly sufficient and that house price inflation has been driven purely by monetary factors. 

Unfortunately, these views tend to be mutually reinforcing. Afterall, it is much easier to argue against the need for more housebuilding when you believe doing so would barely shift the dial on unaffordability. 

That is not to say people’s concerns about housebuilding are not without merit. Too many houses have been built without any input from locals, and without taking adequate account of local need. People are also justified in feeling resentment that politicians have allowed uncontrolled immigration without democratic consent whilst failing to, or in some cases actively blocking, the building of new homes and infrastructure to accommodate the rise in population (the famously NIMBY Lib Dems being prime examples).

Our latest report therefore goes back to basics. It makes several arguments that, while obvious to some, need to be reiterated as firmly as possible. 

Namely, the simple fact that for decades now we have failed to build enough homes in the face of increasing demand. And that the homes we have been building are often some of the smallest in Europe. 

In response to those who deny supply is the primary driver of this surge in unaffordability, we highlight the explosion of house prices in the UK when compared to similar economies, such as France or the Netherlands. All three countries – the UK, France and the Netherlands – have seen similar population growth since 1970. 

However, both France and the Netherlands roughly doubled their housing stock, whereas the UK’s has grown by just 46%. Accordingly, real house price increases in the UK have been nearly more than double those of France and almost 50% more than the Netherlands, even as interest rates have been broadly comparable.

A similar pattern can be seen within the UK itself. It is in the areas of highest demand and where supply has failed to keep up that unaffordability is at its worse – particularly in London and the South East. 

Despite this, far too many Conservative Party politicians seem to have come to the delusional conclusion that brownfield land, ideally outside the South East of England, is the only place we can build the homes we need.

Of course brownfield land should and must be better utilised and turned into the homes that we desperately need. 

We at the CPS strongly support turning disused high street shops into homes (Reshaping Space). This would have the dual benefit of transforming ugly, disused shops as well as provide a much needed economic boost to our struggling high streets.  

However, brownfield land alone is not the answer. Firstly, there is simply not enough of it – nowhere near enough in fact. In addition, brownfield land is not distributed evenly. Only in the North West does it have the potential to meet 50% of projected need over the next 15 years. Most regions could not even meet a third of projected need via brownfield. 

Cities like London and Bristol could build just under a quarter of the homes they need over the next 15 years on currently existing brownfield sites. And of course most rural areas have almost no brownfield. Much brownfield may also be in areas where new homes are unviable, or may require prohibitively expensive remediation.

We therefore of course need to focus on policies that support brownfield development. A brownfield first policy is a good one. But a brownfield only policy that arbitrarily blocks greenfield housing would be a disaster that would threaten Conservative electoral fortunes for generations to come. 

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Elizabeth Dunkley is a researcher at the Centre for Policy Studies