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21 August 2014

Leader: A short-term fall in prices will not solve the housing crisis

A generation-long failure to build enough homes has made prices soar far in excess of inflation, benefiting homeowners at the expense of their children.

By New Statesman

Mamma has every shilling laid out in a first-class mortgage on land at four per cent,” one character tells another in Anthony Trollope’s The Last Chronicle of Barset. “That does make one feel so secure! The land can’t run away.” The belief in an eternal link between property and security has been a mainstay of British household economics for generations. Parents have advised children to get a foot on the ladder, and those seeking investment opportunities have been steered towards bricks and mortar.

For a long time it seemed to work. Individuals were rewarded with soaring personal wealth; politicians with the votes of a grateful middle class. Of late, however, the flaws in the model have become more obvious. A generation-long failure to build enough homes has made prices soar far in excess of inflation, benefiting homeowners at the expense of their children. The situation is worst in London, where the average property price has edged ever closer to £500,000.

This phenomenon raises the spectre of a return to a pre-Victorian class system, in which your prospects depend less on education, hard work or thrift than they do on the generosity of your parents. It does more immediate damage, too. About nine million people in England now live in private rented accommodation, from which they can be evicted at a few weeks’ notice.

There are signs that this particular bull run may be reaching its peak. According to the Office for National Statistics, the average house price in the UK hit an all-time record of £265,000 in June. (The figure for London was £499,000.) But a survey by the property website Rightmove suggests that asking prices have since begun to fall back, dropping by nearly 4 per cent in just two months. This may be an unusually large summer blip. However, with interest rates poised to rise, and mortgage affordability already stretched to the limit, it may be the start of something more significant.

If the long house-price boom has created problems, so, too, would a poorly timed downturn. Britain remains vastly short of the housing that its growing population needs: any sustainable solution will demand an increase in housebuilding rates. That in turn will entail changes to land-use restriction to release more land in our bigger cities and the green belts that surround them. In the meantime, we require new regulations to protect renters from the neglect and caprice of bad landlords.

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All these policies will be difficult to implement, and are likely to inspire fierce opposition. The danger is that, with an election looming, this summer’s dip in the housing market could reduce the pressure on politicians to win a mandate for such controversial measures by including them in their manifestos. A slight fall in prices today could, paradoxically, make a significant fall in the long term less likely. 

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Exporting the Doctor

On Saturday Doctor Who returns, in the regenerated form of Peter Capaldi (see our discussion on page 38). The BBC’s flagship show has much in common with the band on our cover this week. Both the Beatles and Doctor Who are products of the 1960s that present a distinctively British view of the world, combining wit, humour and lingering imperial pretention. Both conquered America (even if, for all his Gallifreyan technologies, it took the Doctor rather longer).

It is easy to dismiss pop-cultural icons as ephemeral, yet both Who and the Beatles have racked up a half-century and they show no sign of fading. There is an argument that, as our economic and military clout wanes, such exports will be critical tools through which Britain can market itself and its ideas to the world. This is a point worth remembering the next time a minister questions the purpose of the arts budget. When it comes to culture, we remain a superpower.