Why decades of failed housing policy has held our cities back

With 100,000 stalled sites in London alone, housebuilding needs more help.

After decades of failed housing policy, the UK is now facing a housing crisis. Currently, the UK is building around 100,000 homes fewer than is required to keep pace with demand each year which is one of the reasons we are experiencing high house prices. In fact, since 1959, the UK has seen a real term increase in house prices of 300 per cent; if the price of a dozen eggs had increased as quickly they would cost just under £19 today.

Current government forecasts suggest we need to build 232,000 houses per year but the problem is that the UK has only done this once in the last 30 years. The UK’s housing shortage must be addressed as a priority to unlock valuably needed economic growth and to improve the lives of people across the country. That’s why this year, Centre for Cities has focused on how to put place back into housing policy through our annual health check of UK cities, Cities Outlook 2013, sponsored by the Local Government Association.

One of the main problems is that housing policy is set on a national level, and house building incentives are applied too widely and do not take into account the specific housing needs of each city. Some cities need new homes while other cities have plenty of vacant housing stock but need funds to retrofit or reconfigure existing development. Cities need the freedoms and flexibilities to make decisions about how best to meet the particular needs of their residents.

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Cities such as Cambridge, London and Oxford, for example, are the most unaffordable places to become a homeowner in the country, while also experiencing relatively low vacancy rates. Restricting housing in high performing cities such as these will hurt economic performance as current residents can’t afford to buy, new people can’t come to live and work, and employers are restricted in personnel. In these places, policy should focus on increasing housebuilding.

In cities such as Burnley and Hull, where housing is most affordable but vacancy rates are relatively high, a focus on the supply of housing (except where there is a clear shortage of a certain type of housing) may not help the local economy. In fact it could have the reverse effect – the supply of housing could put a downward pressure on house prices which would hurt current home owners. In these places, policies to deal with vacancy and quality of housing stock are likely to be more beneficial as they can improve the quality of life of local residents, help make areas more attractive to businesses and potentially generate jobs in the form of retrofitting and refurbishment.

Boosting housing supply requires short term and long term policies. In the short run, there is the potential to provide quick boosts to the housing market which would also increase employment and improve economic performance. There are around 400,000 units on stalled sites across England and over 118,000 of these units are found in the ten most unaffordable cities. Initially prioritising these through existing policies, such as Get Britain Building, could provide significant economic benefits in the short term. The construction of 100,000 new houses could support around 150,000 jobs (of which 90,000 are in low skilled positions) as well as providing a boost to the national economy of around 1 per cent.

Top 10 by affordability

  City Affordability ratio (2012) Vacancy rate (% of stock) Stalled sites
1 Oxford 14.7 2.30% 385
2 London 13.6 2.30% 101745
3 Cambridge 11.7 1.00% 2188
4 Brighton 11.1 2.60% 1555
5 Bournemouth 10.9 2.50% 1320
6 Aldershot 10.0 2.70% 1526
7 Crawley 9.5 1.60% 1067
8 Reading 9.3 1.80% 3136
9 Bristol 9.0 2.40% 5346
10 Worthing 8.8 1.80% 314

In the long term, issues such as opening up the house building industry, incentivising developers to use the land they currently have permission to build on and reforming the planning process will be important to increasing overall housing supply. Places should also be empowered to devise their own planning policies including, for example, the use of greenbelt land.

It will take time to reverse the consequences of decades of failed housing policy. However, the correct short term policy focus can bring quick wins for people, cities and the economy, while a focus on greater devolution of power and responsibilities to cities could help resolve the UK's housing crisis over the long term, and deliver sustained benefits to the national economy.

Cities Outlook 2013, the flagship annual publication by the Centre for Cities, sponsored by the LGA is published today. Find out more details.

Photograph: Getty Images

Alexandra Jones is the director of the Centre for Cities

Getty Images.
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Why Theresa May won't exclude students from the net migration target

The Prime Minister believes the public would view the move as "a fix". 

In a letter to David Cameron shortly after the last general election, Philip Hammond demanded that students be excluded from the net migration target. The then foreign secretary, who was backed by George Osborne and Sajid Javid, wrote: "From a foreign policy point of view, Britain's role as a world class destination for international students is a highly significant element of our soft power offer. It's an issue that's consistently raised with me by our foreign counterparts." Universities and businesses have long argued that it is economically harmful to limit student numbers. But David Cameron, supported by Theresa May, refused to relent. 

Appearing before the Treasury select committee yesterday, Hammond reignited the issue. "As we approach the challenge of getting net migration figures down, it is in my view essential that we look at how we do this in a way that protects the vital interests of our economy," he said. He added that "It's not whether politicians think one thing or another, it's what the public believe and I think it would be useful to explore that quesrtion." A YouGov poll published earlier this year found that 57 per cent of the public support excluding students from the "tens of thousands" target.

Amber Rudd, the Home Secretary, has also pressured May to do so. But the Prime Minister not only rejected the proposal - she demanded a stricter regime. Rudd later announced in her conference speech that there would be "tougher rules for students on lower quality courses". 

The economic case for reform is that students aid growth. The political case is that it would make the net migration target (which has been missed for six years) easier to meet (long-term immigration for study was 164,000 in the most recent period). But in May's view, excluding students from the target would be regarded by the public as a "fix" and would harm the drive to reduce numbers. If an exemption is made for one group, others will inevitably demand similar treatment. 

Universities complain that their lobbying power has been reduced by the decision to transfer ministerial responsibility from the business department to education. Bill Rammell, the former higher education minister and the vice-chancellor of Bedfordshire, said in July: “We shouldn’t assume that Theresa May as prime minister will have the same restrictive view on overseas students that Theresa May the home secretary had”. Some Tory MPs hoped that the net migration target would be abolished altogether in a "Nixon goes to China" moment.

But rather than retreating, May has doubled-down. The Prime Minister regards permanently reduced migration as essential to her vision of a more ordered society. She believes the economic benefits of high immigration are both too negligible and too narrow. 

Her ambition is a forbidding one. Net migration has not been in the "tens of thousands" since 1997: when the EU had just 15 member states and the term "BRICS" had not even been coined. But as prime minister, May is determined to achieve what she could not as home secretary. 

George Eaton is political editor of the New Statesman.