We need new homes, and now

What is affordable housing? The Secretary of State for Local Government, Stephen Byers, who has just promised more of it, and the Mayor of London, Ken Livingstone, who wants developers to include a proportion of low-cost dwellings in all schemes for the capital, both use the phrase as if its meaning were obvious. Yet all houses are affordable to someone, and a jerry-built new development in east London may cost more than a solid three-bedroomed house in Lancaster. What both politicians mean is that they want those on modest incomes to be able to afford to live where they can work.

Misleading cliches lead us to the wrong solutions. Building "affordable" houses will not enable those on even the national average wage of £400-plus a week to buy in the south-east, where the average dwelling costs £147,600. Nor will it ensure that essential workers such as teachers get a foot on the property ladder in London, where shortages have led to spiralling house-price inflation. Architects and housebuilders will be doing no one any favours by designing rabbit-hutch dwellings or using cheap materials. They will merely be creating the next decade's slums.

The main driver of house prices is economic policy, but there is little that government can do to make it friendlier to first-time buyers. Increasing the cost of borrowing would dampen demand for mortgages, and therefore houses, but would create far greater problems for industry. Low interest rates would make borrowing easier but push up house prices further in areas of shortage.

What about subsidies for essential workers, as proposed by the Mayor of London? As an emergency measure to deal with an immediate teacher shortage, this has attractions, but in the longer term, it threatens to create as many problems as it solves. Shouldn't other essential workers, even the lower-paid - hospital cleaning staff, for example - also be helped? Many have been forced to the south-east to find work and, having no choice but to stay, face official indifference towards their housing problems. Housing benefit and other social subsidies may help them rent run-down public housing or poorer-quality, overpriced private accommodation, but they are tens of thousands of pounds away from getting on the housing ladder. Why, they might reasonably ask, should their taxes pay for interest-free loans to richer people, such as teachers, to reap the benefits of rising house prices?

There is another solution, but no government has dared examine it since Margaret Thatcher coined the phrase "property-owning democracy" in the 1980s and government abandoned responsibility for public housing. This is to deal with the supply side of the equation. Britain is building fewer houses now than in any year since 1924. We build half as many houses as we did in the 1960s, when Ken Loach's Cathy Come Home (1966) forced the nation to rethink its housing strategy. The private sector has not filled the gap, although private landlords have grown wealthy charging exorbitant rents (publicly subsidised through the housing benefit system) for slum properties. Roughly 1.6 million children live in sub-standard homes.

So far, the Secretary of State's proposed remedy is to extend the "property-owning democracy" by selling off the UK's four million remaining publicly owned houses and flats, and meanwhile to put pressure on local authority landlords to improve their properties. He must do much more.

We should not be terrified of the notion of reviving public housing where it is needed, nor of imaginative halfway schemes such as shared public/private buyer ownership, which can help modest earners on to the ladder.

The 1999 report of Lord Rogers's Urban Task Force, which spelt out how to increase the housing stock in inner cities, lies gathering dust on the Secretary of State's shelves. If the private sector cannot build the houses that essential workers need, the government must.

This article first appeared in the 13 August 2001 issue of the New Statesman, The diva of Downing Street