Liam Halligan - author of "home truths"

We cannot become the party of Nimbyism – that would hugely damage the country and our electoral fortunes”. So said Simon Clarke last month. The former Housing Secretary was pleading with fellow Tory MPs to support more housebuilding, defying not-in-my-back-yard campaigners who block new developments.

 

Back in December, Rishi Sunak had bowed to pressure from the same Tory backbenchers, dropping compulsory householding targets for local authorities. Keir Starmer responded by pledging a future Labour government would reinstate such targets.

 

The Tories are “killing the dream of homeownership”, declared Starmer, jabbing his finger at the Prime Minister from the House of Commons despatch box. Labour wants to “concrete over the greenbelt”, Sunak replied.

 

The UK has a fundamental lack of homes to buy and rent – as I describe in my book: Home Truths – the UK’s chronic housing shortage. That’s why today’s young adults spend more on housing and are less likely to be owner-occupiers than any generation since the 1930s.

 

While 3.1 million UK homes were built during the 1960s, that fell steadily over the following decades to just 1.5 million throughout the 2000s, then 1.1 million during the ten years from 2010, lagging population growth. While France and Germany now have 580 and 520 dwellings per thousand inhabitants, the UK has little more than 400.

 

That helps explain why UK house prices have surged more than 400% in income-adjusted terms since 1970, compared to 180% in France and just 40% in Germany – stoking the UK’s chronic affordability crisis.

 

No wonder owner-occupancy has plunged among 25 to 34-year-olds, from 70% in the mid-1990s to less than 40% now – with over half a generation denied the security of home ownership at this crucial family-forming age.

 

The private rental sector has meanwhile doubled to 20% of households, with rents soaring – again reflecting the serious lack of homes.

 

Stubbornly high inflation, and soaring gilt yields have pushed up mortgage rates over recent weeks, putting the brakes on years of rising house prices. But the average UK home still costs around 8.5-times average annual income – compared to a historic long-term multiple of 4-5-times.

 

That’s why so many UK households remain “priced out” of home ownership, facing the locked door of unaffordability. Open market rents meanwhile remain sky-high in many places. And a dearth of social housing means millions more are on living in often sub-standard subsidised rentals, pushing the housing benefit bills well above £20bn, more than the combined running costs of the Home Office, the Department of Justice and the Department for Transport.

 

Successive Conservative prime ministers have vowed to “get Britain building”. Millions of “priced-out” young adults, after all, if they became homeowners, would be more likely to vote Tory in years to come. The expansion of social housing would also be electorally popular, not least in many of the “red wall” seats the Tories won from Labour in 2019 and need to retain to stay in office.

 

But from the Cameron-era onwards, the Tories have failed to tackle the UK’s housing shortfall, reverting to Nimbyist type. Does Sunak understand that the sacred greenbelt, far from being “concreted over”, has more than doubled in size over the last 40 years? It now covers 13% of this country’s landmass while residential buildings, including gardens, account for under 2%.

 

Much of the greenbelt is anyway inaccessible to the public or ugly urban scrub – of no aesthetic value. Yet many wealthy homeowners, not entirely irrationally, continue to wield holier-than-thou environmentalism to scupper local housebuilding. We simply must build more homes, though, so today’s young adults have the chance to live in dignity and raise families.

 

Since 2013, the Tories have relied on Help to Buy – lending around £25bn of government money to a limited number of buyers to purchase newbuild homes. That’s just stoked demand in the face of inadequate supply, increasing prices more for the vast majority who can’t access the scheme.

 

Help to Buy has also helped entrench the UK’s already-dominant large developers – some of whom have used the scheme to channel captive homebuyers into substandard new builds, on punitive leaseholds.

 

What’s needed instead is radical supply-side reform – to make sure the planning permissions granted over recent years, a growing share of which haven’t been built out, are converted into saleable homes. Large developers stand accused by ministers and many others of staging a deliberate go-slow – making higher profits by producing fewer homes to keep prices rising.

 

Developers producing under 100 homes a year now build barely a tenth of new homes, down from a third before the 2008 global financial crisis, which blew so many of them away.  We need to inject competition into this once vibrant sector, helping small and medium-sized enterprises (SMEs) – who build quickly after receiving planning permission to aid cash flow. That’s why the Competition and Markets Authority has launched the first official inquiry into UK housebuilding since 2008.

 

But the central argument of Home Truths is that, when it comes to the UK’s housing shortage, the nub of the problem is our opaque, dysfunctional land market.

 

When residential permissions are granted, land values can rocket many-hundred-fold – with this vast planning uplift going almost entirely to landowners, developers and intermediate “land agents”.

 

My book argues this uplift should be shared 50-50 with local authorities. That would dampen price speculation, resulting in cheaper land and, in turn, more affordable and better-quality new homes.

 

Such land value capture (LVC) would also generate significant funds to build schools, hospitals and other infrastructure, making new developments – and even entire new towns – more popular, countering Nimby arguments and transforming the fraught local politics of planning.

 

Using LVC in this way is an ambitious proposal, requiring “buy-in” from both Labour and the Tories to make it stick. A less contentious policy to boost housebuilding quickly would be to make better use of state-owned land – which amounts to some 6% of all freehold acreage, almost a million hectares, rising to 15% in urban areas, including countless sites prime for development.

 

If the state released just one 20th of its land for development, that would be enough, at the UK average density of 45 homes per hectare, for over two million homes – far more if urban areas were used, where building densities are higher.

 

Sales of government land should be restricted to small, local builders – and include strict conditions relating to build-out pace and affordable and social housing provision.

 

Presented in the right way, this “Great British Land Sell-off” would appeal to both the centre-right (smaller state, more privatisation) and centre-left (boosting the supply of affordable and social housing relatively quickly).

 

The UK’s chronic housing shortage is a cross-party problem, decades in the making – and cross-party collaboration is sorely needed to solve it.

 

Liam Halligan writes his weekly Economic Agenda column in The Sunday Telegraph

 

“Home Truths: the UK’s chronic housing shortage”, with a foreword by Former Chancellor and Former Housing Secretary Rt Hon Sajid Javid MP – is published by Biteback

 

Use the code HOME30 to receive 30% discount on the book using the link or scan the QR code below.

 

www.bitebackpublishing.com/books/home-truths