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How can we solve Britain's housing crisis?

Policymakers and experts from across the political spectrum each offer one suggestion.

New Statesman
Photograph: Getty Images.

George Eaton writes: As well as enduring the slowest economic recovery in more than 100 years, Britain is suffering from a severe housing crisis. Housebuilding is at its lowest level since the 1920s, with just 98,280 registered starts in 2012, down 11 per cent on the previous year and far short of the 230,000 new households that were formed.

Private rents have increased by 37 per cent in the past five years and are forecast to rise by a further 35 per cent over the next six years. As a result, as many as five million people rely on state aid to remain in their homes. The government spent £23.8bn on subsidising landlords through housing benefit last year, more than 20 times as much as it spent on housebuilding.

Below, policymakers and experts from across the political spectrum each offer one suggestion to help solve the crisis.

John Cridland, CBI director-general

Make stamp duty more progressive

Clearly there is no one silver bullet that will solve the UK’s housing crisis. But if there’s one measure that could make a real difference in the long-term I would urge ministers to change the current system of stamp duty, which skews the market.

Under the current system, stamp duty is charged at a certain percentage based on thresholds linked to the value of the property. It means someone buying a property worth £251,000 is landed with a stamp duty bill of £7,530, while the buyer of a home worth just £1,000 less only pays £2,500.

We want the government to introduce a more progressive system where buyers crossing one of the stamp duty thresholds would only pay the higher rate on the portion of the property that falls within the higher bracket. This would be fairer and simpler for homebuyers and end the current distortion in one fell swoop.

But there’s much more that needs to be done.

We’ve been falling woefully short of building the homes we need for years which is why the availability and affordability of housing has become one of the most pressing staff recruitment and retention issues facing business. Unsurprisingly, our most recent London member survey highlighted housing as one of the biggest drawbacks to doing business in the capital.

It is clear that there’s huge pent-up demand from first-time buyers to second-steppers trading up the property ladder and the Help to Buy initiative is a brave scheme to try to meet this demand. And there are early signs that the first stage is working – with 10,000 reservations for new build homes in the last four months. That’s helped lift consumer confidence by widening access to mortgages, getting orders onto developers’ books and boosting the construction industry.

The second stage of the scheme around mortgage guarantees will offer a critical lifeline to trapped second-steppers and underpin the early signs of confidence returning to the housing market. But there are some serious questions ministers need to answer – specifically how the government intends to exit the mortgage market without a knock-on drop in prices; how it will minimise the risk to taxpayers of having to stump up for defaults and at what fee mortgage lenders will pay for government guarantees.

Help to Buy is only part of the jigsaw. House prices will continue to rise unless we take urgent action to increase supply. We need to make sure local councils are taking a proactive approach to planning reform to avoid lengthy delays in getting homes built and look to increase the number of properties available for the private rental sector.

Roger Harding, head of policy, Shelter

Build new garden cities

Each year we are failing to build the homes we need just to keep up with demand and Shelter is seeing the direct consequences of this shortfall, with families priced out of home ownership, soaring rents and thwarted family aspirations. The scale of the challenge is such that we need enough homes to fill Hemel Hempstead, Letchworth, Milton Keynes and more.

So the solution in effect needs to be, let's build Hemel Hempstead, Letchworth and Milton Keynes. After all, according to recent comprehensive analysis, 90% of England is not built on, with green belt land accounting for only 13% of this undeveloped total.

There is no silver bullet for our housing crisis - successive governments' failure to build has put pay to that – but the solutions are out there. They just need to go far further than our current piecemeal plans and step away from pushing more money, Help to Buy-style, into the housing shortage; something which can only lead to dangerously rising prices.

We know there are initiatives that can turn the situation around; this crisis isn't unprecedented and low levels of building don’t have to be an inevitable consequence of the credit crunch. We tackled the slums and Blitz-induced post war crisis. France is currently managing to build three times the number of homes we are (with plans to hit five times).

So rather than tinkering around the edges, let’s have a housing policy combining the vision and scale of the New Towns with more modern aspirations. The Prime Minister backs them in principle, but not yet in substantive plans.

New Market Towns for the 21st Century would combine infrastructure, housing, environmental and employment powers in a development corporation that would fund the scheme by borrowing against future land value increases, not the public debt. They could use Dutch and German-type land powers to bring together suitable sites. They could bring in small builders and self builders to deliver quality homes alongside the big players. They could introduce a new programme of shared ownership homes to provide the squeezed middle with the stable home we know they crave.

Choosing exactly where they would go isn’t easy and, although better design would help, inevitably New Market Towns wouldn't please everyone and NIMBYism is a hurdle that would need to be overcome. But we have already seen the leadership this solution requires. The Olympic park was led by a single body with imagination as well as planning powers, financial autonomy and cross party political will, to deliver genuinely affordable homes in East London. Surely this is proof that new towns need not be confined to history, we can create new homes and communities that work in the 21st Century.

Jack Dromey, shadow housing minister

Make housebuilding a national priority

What one thing would change our housing system for the better? That was the question I was asked to answer when writing this article.

With the country in the midst of the biggest housing crisis in a generation and the number of homes we are building fewer than half those that we need, building more homes is the obvious answer. But that begs the next question, what one thing would I change about our housing system in order to build more homes?

There are a number of changes that can and should be made. Greater investment, public and private, is of course crucial. Reform of our land market, which acts as a barrier to expanding housing supply, is also essential. Increasing competition and the range of institutions that deliver new homes must also be a priority from revitalising the role of local government to build a new generation of council homes to increasing the output of small builders, custom-build and co-operative housing. A focus on building successful new communities, whether as part of urban regeneration or through new settlements is also fundamental. And the agenda must not just be about the number of homes we build but place-making and the building of high-quality, well designed and environmentally friendly mixed communities.

Which one would I choose to change our housing system for the better? On my desk lies a copy of the Labour Party’s Post-War Policy “Housing and Planning After the War.” It is a fascinating document which outlines the nature of the housing crisis and the need for a huge building programme to achieve the Labour Party’s policy of providing “every family with a home of a decent modern standard.” Aside from the need for a building programme, the document refers to a wide range of issues that the post-war Government would need to address.

But what is most striking is the final section entitled “Britain’s Task”, it says: "It must again be emphasised that the world as we visualise it after the war can only be gradually realised. Constant effort will be required to prevent its frustration by vested interests, but if a vigilant guard is maintained and we keep our objective clearly before us, with vision, energy and courage, its realisation will be achieved with ever-accelerating speed. Then, undoubtedly we shall have the satisfaction of knowing that we are playing our part towards the building of a New Britain."

Then, as now, the crucial thing needed to tackle the housing crisis is political will. The will to put fulfilling that basic human desire, that aspiration, for a decent home to buy or to rent at a price you can afford, providing a secure place to bring up a family, at the heart of our politics.

Then, as now, nobody should be in any doubt about the Labour Party’s determination to rebuild this country and give families a chance of a decent home for their children just like their parents did before them.

And in Ed Miliband, we have a leader with the vision, courage and crucially, the political will, to succeed. Ultimately it is about political will. With that and the fact that David Cameron has presided over the lowest level of new homes built in peacetime since the 1920s in mind, the one thing that would change our housing system for the better seems rather obvious. At the 2015 general election, housing, will once again be a great national priority for Labour.

David Skelton, director of Renewal, a new campaign group aiming to broaden the appeal of the Conservative Party to working class and ethnic minority voters.

Devolve planning powers to the cities

The shortage of housing represents one of the biggest problems facing our country. There are around 1.8 million people on the social housing waiting list and the average age of the first time buyer is now 37. The cost of housing now makes a significant contribution to the squeeze in living standards that has been hitting working people since 2005, with private rent increasing by 37% in five years.

Against this backdrop of a housing shortage, the last government failed to meet their housing targets and the recession has meant that the number of housing starts is well below what the country needs. The first decade of the century was the first time in 60 years that home ownership has fallen, from 68% to 63%.

It’s imperative that politicians address our housing shortage as a priority. Conservatives should position themselves squarely as the party of housebuilding, following in the footsteps of Noel Skelton and Anthony Eden’s vision of a property owning democracy, Harold Macmillan’s housebuilding programme and Margaret Thatcher’s right to buy. Becoming the party of housebuilding would give the party an optimistic message of spreading home ownership and ensuring a decent home for all.

Removing bureaucracy that prevents use of brownfield land, converting empty properties and allowing shops to empty business premises to be used for residential purposes will all help, but they’re not going to solve our housing crisis alone. That needs a more radical rethinking of our top-down planning laws, which continue to hold back housebuilding.

At the moment, housing goes where bureaucrats think people want to live rather than where people actually want to live. Government should be prepared to devolve power over planning to cities, so they can decide whether to be pioneers in adopting a more liberal approach to planning policy in order to build more homes and create more jobs.

Liberalising planning policy should include putting power in the hands of local people, including in deciding whether to build on the greenbelt. Whilst areas of outstanding natural beauty should, of course, be protected, some building on the greenbelt should be allowed, particularly in areas around cities, where there is local support and where the local community is adequately compensated

This will help ensure that development is both attractive and acceptable to local people, whilst also meaning that successful cities are able to grow and prosper and the housing shortage is tackled. This could be particularly powerful in helping Northern cities to prosper, following the example of Preston, which was one of the highest growth cities between 1998 and 2008 due to more liberal planning laws. If the South isn’t prepared to build more houses that also gives Northern cities a chance to expand and encourage more people to live and work there.

Changing planning laws aren’t going to get more houses built on their own. Government should act against the big business vested interests who are sitting on land with planning permission waiting for property prices to rise, so-called land banking. Providing a right to build, as is the case in much of Europe, where local people are encouraged to design their own homes for land that has already been granted could also help boost house building.

Housing is a vital challenge facing politicians. Tackling the housing shortage and spreading home ownership should be a real priority.

Lutfur Rahman, mayor of Tower Hamlets

Increase grant funding to local authorities

London’s dire housing crisis - the capital’s woeful lack of social housing coupled with grossly inflated prices in the private housing sector - calls for immediate and radical measures. But there is no doubt that Britain’s national housing crisis has been severely exacerbated by government policies driven partially by austerity. I would like to think that a future Labour government will make affordable housing one of their top priorities, but our situation is so serious we can’t afford the wait. We need this government to change its policies now.

The government, in the shape of Grant Shapps and George Osborne, is conspiring to make it difficult for authorities such as mine to build new homes – although that has not stopped us from straining every possible sinew to build the most of any authority in Britain. Yet the 4,000 new affordable homes we will have completed during my first term as Mayor only go part of the way to providing homes for the 22,000 people now on our housing waiting lists.

Grant funding has been massively reduced for new build of affordable housing. Grant rates have reduced from over £100000 per home to nearer £25000, per home compared to the investment in the National Affordable Housing Programme which ran from 2008 to 2011. With the average cost of building a new home at £140,000 the new grant provides less than 14% of the total cost. In inner London, with far more expensive build and land costs the price per new social home is around £200,000, making any available HCA (now operated in London by the GLA) grant a tiny contributor to the overall cost. This has resulted in a massive reduction in the number of social homes provided nationally.

Even more damagingly, to be able to access Government Homes and Community Agency (now operated in London by the GLA) grants for new house building, housing providers have to commit to charge tenants up to 80% of the private market rate, and many are choosing to do so. This is the new ‘affordable’ rent. Yet we know that on average the people in our borough, who need housing can only pay, at maximum, around 65% of market rents and on the very smallest homes.

My priority is to campaign and persuade ministers to re-consider their deeply damaging housing policies. If I could have my way I would immediately remove the condition that HCA and GLA grants can only be made if tenants pay up to 80% of the market rate, since so few can possibly do so. Moreover, simply returning to the pre-2010 levels of grant per home would go a long way to solving our housing problems locally and nationally as well. But the question remains; is the Government really interested in providing housing that ordinary Londoners need?

Graeme Cooke, research director, IPPR

Switch spending from housing benefit to housebuilding

One big lesson from post-war housing policy is that we can’t rely solely on the private sector to build the homes we need. The era when 300,000 plus new homes a year were regularly built, from the 1950s to the 1970s, was based on a partnership of public and private investment. A prominent reason for our current housing shortage is the collapse in public house building from the early 1980s, which reduced overall output and left the delivery of new homes dependent on a private house building sector which responds to market conditions not housing need.

This change was partly driven by Mrs Thatcher’s aversion to social housing. But also a policy decision, of profound consequence, to shift the balance of public spending from capital grants for building homes to cash benefits for subsidising rents. In principle, this could extend choice and mobility for households. And, in the short term, Housing Benefit meets immediate need. But as a strategy for housing policy, the cycle of falling capital investment and a rising benefit bill into which we are locked makes no sense (especially when 40 per cent of rent subsidy now goes to private landlords).

This problem has not emerged overnight, but fiscal constraint casts it in an urgent light. During the Labour years, rising public spending covered up the structural problem. But capital and benefit spending on housing are now both being cut. This exposes the perversity of public spending on housing, 95 per cent of which now goes through the benefit system. This is bad policy and bad politics. Therefore the priority should be advancing institutional reforms which connect decisions about the housing market and the benefit system – and create a mechanism to re-balance public expenditure overtime.

This shift won’t be unlocked in Whitehall given its blindness to the diversity of England ‘s many housing markets. Instead it requires the chronic and misguided centralisation of housing policy to be overcome. A new generation of city and council leaders, impatient to improve housing in their areas, find themselves in a policy and finance straightjacket. So the next spending review should mobilise their energy and leadership, through progressively greater control over public expenditure for housing, with the ability to strike the right balance between building homes and subsidising rents.

Alongside serious reform of our dysfunctional land market, this could offer a plausible route to improving affordability of housing for the majority and value for money for the taxpayer.

Mark Clare, Barratt Developments group chief executive

Double the land release target for house building

It’s an uncomfortable truth that the UK’s housing crisis is going to get worse before it gets better. It will affect every location and every tenure. Over the next two years or so, we can and will increase the number of homes we build by around 20% - as the mortgage market improves. We are buying more land and will be recruiting another 600 apprentices and graduates.

However, the yawning gap between demand and supply will continue to grow. We are already building homes on all the land where we have full and implementable planning permission, so we need to consider two issues to step up the number of homes. In the short term we have to speed up the planning process. Whilst the process is now a better one that is leading to a more constructive dialogue, it is still too slow. Even small, relatively uncontroversial sites can take well over a year to be fully approved. And it can be a lot slower than that.

But we also need to think about the longer term and how we make more land available for housing. Here, there is an urgent role for the public sector because it owns around one third of the land suitable for housing. The government has a target to release enough of its land for 100,000 new homes. I believe that should be doubled. Some may say sell it off to the highest bidder. That is not the approach I would like to see. As the public sector owns the land, it should play a major part in specifying the way it should be used – the required economic and social outcomes. In short, the public sector should act like a progressive land owner interested in long term value as well as short term price.

There are great examples already in progress. Former collieries are now being regenerated into thriving new communities. Old hospital sites derelict for years, are now on the verge of providing new housing and new employment. Active partnership between the private and public sector to build more homes will also mean that the housing sector has to change. We have to show that good design, high environmental standards and a real focus on quality are an integral part of what we do.

We have to do more to establish a lasting legacy of economic and social benefit. We have to win the debate about new homes and that means better as well as more housing. Only then can we address the issue that while people see that there is a housing crisis, they just don’t support new housing in their community.

Owen Hatherley, author of A Guide to the New Ruins of Great Britain

Create a universal public housing system

The obvious solution to the housing crisis is universal public housing. Or, as it was called in the UK, 'council housing'. That is, housing owned and controlled by democratically-elected public bodies, rented out at regulated low rents to those who need it. The term 'council' is important here – built by a body you can vote in or out, that you can stand for election to, that your council taxes pay for. It isn't 'social' housing, controlled by charities or basically profit-oriented Housing Associations; it isn't 'affordable' housing, where percentages of private speculative schemes are sold at a slightly subsidised price; and it isn't 'co-operative housing', where small elective groups manage to get themselves better housing. In contrast to all of these, council housing is a democratic, public and universal service, as much as the National Health Service is, or rather was.

Council housing is also bigger – Parker-Morris space standards still apply – it is usually better planned, with more green space; and it is, of course, cheaper. It's staggering how we've been conned into treating it as a grim residuum, and the shoddiest, pokiest private housing in Europe as somehow superior. Although there are an estimated 5 million people on the council waiting list, it is regularly claimed that there is no 'need' for it any more. It does not entail attaining a place on the property ladder. It will not make your children rich. It needs state subsidy – although so do many privately owned 'regeneration' schemes, so does Help to Buy, and so do bail-outs for delinquent Building Societies. It is associated with system-built blocks from the late '60s, although council housing has encompassed – and should encompass – everything from the semis of Wythenshawe to the grandiose futurism of the Trellick Tower.

But 'council' ought to mean 'universal'. Newham Council currently plan to build Richard Rogers-designed houses that will then be sold at 'affordable' (ie, 80% of market) rates; Labour councils are still dominated by dated neoliberal dogma. While London, Sheffield or Glasgow subject their estates to 'decanting' (or 'eviction', as it used to be called) the recent renovation of the Tour Bois-le-Petre in Paris entailed building new wings, making existing flats larger and retrofitting the entire block – without privatising or moving anyone out. This could be the future of council housing, but first we need a break both with austerity and New Labour inertia.

Alex Morton, head of housing, planning & urban policy, Policy Exchange

Transfer planning controls from Town Halls to local people

To get Britain building we need fundamental reform of our planning system. There are plenty of good ideas out there, (e.g. more custom-build, converting derelict shops to homes, to Garden Cities), but housing’s core problems are deep and structural.

Many people do not grasp that new homes are effectively rationed, like post-war bananas. Up and down the country, local council officials decide what land and how much land we should devote to homes, what type of new homes are necessary, and then impose it on local people. It is no exaggeration to say it is a system straight out of 1940s wartime economics. It simply does not work.

All other problems, once you work out what created them, relate to this basic dysfunction that makes NIMBYism sensible and reduces planning permissions. So developers land bank as they are worried about obtaining planning permission and they think land will go up in value. The rising social housing waiting list fell in Right To Buy’s heyday 1980-1997 as private housing was more affordable.

Our system is more inflexible than most other countries, and also has larger planning areas. Our 300 or so local planning authorities compare with thousands in places like Germany or France, meaning that decisions taken at a very remote level. Unlike most countries, there are limited benefits for communities that allow development. A planning system is necessary to protect our most beautiful areas from inappropriate development, and to let local people block unattractive housing.

But we need a system that does this without micro-managing everything, and gives a direct voice to local people on issues around quality and infrastructure. We need focused incentives for local development, clear quality control for local people, open public green space like parks and reserves if greenbelt is developed, and sensible brownfield redevelopment overseen by local people. Just 7% of England has been developed – we are not short of land.

Of course, a functioning planning system won’t solve everything overnight. But without doing it we will be constantly running just to stand still. Planning is a political issue masquerading as a technical one. Until we treat its resolution as a political issue where both those who want to build homes and local people must both be satisfied, forcing them to negotiate with each other, rather than imposing new homes on local people either from Town Halls or Whitehall, we will not solve the housing crisis.