Why hasn’t government fixed the housing market?
It’s ten years since I worked on a review of housing supply in the UK for the Labour government. I wish I had a pound for everyone in the past couple of years who’s said to me ‘nothing’s got better as a result of your review, has it?’
Sadly, in many ways that’s true. The one change I could point to is that the climate of opinion among the Whitehall policymakers and also the general commenting community has shifted. It’s more widely accepted that a greater supply of housing would be an important part of solving this problem. But the ‘insider/outsider’ problem identified in the review remains. For the majority of those living in an area, more housing is often seen as bad news. It means pressure on infrastructure or loss of open space and views. Obviously this leads to local authorities often being reluctant to approve applications. There are financial benefits from restricted supply for homeowners, for landowners (who are often not developers) and again for local authorities, if it enables them to obtain more from Section 106 agreements. To some extent, the New Homes Bonus now weighs in favour of housing as far as local authorities are concerned, but often not enough to offset the small ‘p’ politics of public opinion.
So central government faces real problems when it attempts to push up the rate of housing supply, especially in the South-East. And in the aftermath of the financial crisis, we are further hampered by the erosion of the supply base with far fewer smaller housebuilding firms. The outcome is what many see as an increasingly unfair housing market, in which the young and low-paid find it very hard to access the kind of housing they would like (either in terms of area, or in terms of space). Meanwhile reforms to the mortgage market, with the sensible aim of improving financial stability, have the unfortunate side-effect of making it harder to first-time buyers to access mortgages relative to buy-to-let landlords.
How can this be resolved? I have my own ideas – but they all fail the test of political acceptability – and I look forward to telling you all just why that is, including where housing associations can contribute. But this raises an obvious question, which I will also seek to address – how is this likely to play out over the future? Surely we can’t just go deeper and deeper into crisis… or can we?
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