Party Leaders Compete with Housing Ambition
At the Conservative conference last week, Boris Johnson declared that Britain needs a billion more homes. Whether that’s true or not, it’s clear that all three parties will try to out-compete each other when it comes to pledging the numbers of houses that they will build.
While this is a good thing, as house building has been below levels of a decent supply for decades. However, the danger is that politicians commit to targets that they can’t deliver on. If they don’t consider the reforms that might be necessary to raise rates of buildings, then they will struggle to meet their own promises.
In basic terms, the problem lies in the fact that demand outstrips supply. However, looking deeper, regional demand for housing is driven by where jobs are, not by prices. Therefore, there is no such thing as a national housing market, only regional disparities. Scarcity of supply, and the relative under-taxation of investment for buy-to-let investors, pushes up the prices for those looking to buy.
House building is in the hands of an increasingly concentrated group of companies, which take homes off the market as soon as the prices become stagnant, which push them up. The people making decisions in the housing market are doing so even though they have little to do with the country’s housing needs.
So What Reforms are Needed?
As the housing charity Shelter has argued, reform of the land market is critical. Undeveloped land with planning permission should be properly taxed to remove the incentive to sit on land. Shelter argues that local authorities should benefit from planning permission, not ‘speculators’.
Property taxes could also be used to manage, demand and reduce the number of first time buyers that are out-competed by investors.
The main reform that’s needed is political, and these are the main barriers. Housing pits home owners against renters, so there are no ‘win-win’ solutions for either party, but success could be measured in stabilising or even falling prices. It’s about balance – rising house prices are bad for buyers but good for home owners.
While house-building targets are a step in the right direction, but to be credible, they need the “how” behind it too.