Wednesday, 11 November 2015

Rising to the challenge

We have a housing crisis. On just about every indicator, the direction of travel is wrong.
Housing costs as a proportion of earnings remain unsustainably high. We are spending 1.4 per cent of UK GDP on subsidising housing costs, compared with 0.14 per cent in Germany. UK housing benefit has doubled in a decade to £24.2bn.

Last week, Conservative Housing Minister Brandon Lewis claimed that his Housing and Planning Bill will  kick-start a national crusade” that will “get one million homes built by 2020” and “help deliver the homes hard-working people rightly deserve, transforming generation rent into generation buy”. 

It’s nonsense. You should put even less faith in Lewis’s claim than that of his predecessor, Grant Shapps, who told me in 2010 that “Building more homes is the gold standard upon which we shall be judged”, before going on to deliver a post-WW2 record low of 135,500 new homes in 2012/13.
Meanwhile, David Cameron proudly proclaims his new Starter Homes’ initiative. These are set to cost no more than £250,000 outside of London and £450,000 within London.  Starter homes at £450,000? Cameron thinks that this is ‘affordable’? Only on Planet Eton! It’s no wonder that ordinary people think politicians are out of touch.

Cameron and Lewis have plucked a promise of “1 million new homes in this Parliament” out of mid-air. Let’s be clear; there is no chance of this being achieved, let alone the 250,000 minimum housing starts required each year, without a significant investment in social housing which is essential to meet housing needs as well as economic objectives. But Cameron, for ideological reasons alone, has set his face against social housing with his latest hugely subsidised right-to-buy scheme for housing associations. 

Tackling the housing crisis requires some radical interventions. Simply building more homes will not redress the problem of absurdly high house prices fuelled by the absurdly high cost of land.
Where planning permission is given for housing, it’s the public purse which should benefit from increase in value. This principle was enshrined in the 1947 Planning Act. The landowner would receive the current use value plus a helpful top up but not the windfall bonus of today’s system.
Denmark and Germany have led the way in addressing the challenge of brining housing land in to use at lower prices, using land value taxes and planning powers. It’s little wonder that they can deliver house-building rates double or treble ours, whilst cutting the cost of housing. If they can do it, so can we.

Building enough new homes is a huge challenge. Getting a fair deal for taxpayers is an even bigger challenge. Land value reform now has to be on the agenda.