Housing in Britain is a policy cluster bomb. Millions of people now own homes which are far more expensive than they ought to be. But if the government builds more houses, and house prices fall, many homeowners will feel betrayed, their wealth and financial security inexorably bound to their ownership of a home that has seen its value inflated by the failures of the housing market.
For politicians, this matters a great deal, because homeowners vote.
There are many reasons why housing in the UK remains so expensive. Interest rates have hit rock bottom, and more people want to live alone. But the shortfall in supply still remains an explanatory factor. We now build as many houses in a year as we used to build in just four and a half months in the late 1960s. A shortfall in supply has pushed up prices.
The result is that the total market value of the UK’s housing stock now exceeds the cost of building it by some £3.7trn: a cool 40 per cent of the net worth of the entire country.
Land itself is not particularly scarce. What is truly scarce is land on which permission to build has been granted. High land costs have given us ‘generation rent’ and pushed up inequality.
The problem is that there are around fourteen million homeowners whose wealth is contained in their ownership of housing assets. This wealth is arguably illusory. Either it sits there as bricks and mortar and depreciates, or it gets passed down via the bank of mum and dad to pay for a deposit, or as an inheritance which is then deployed to buy another, equally over-priced house. But this is a tough argument to win.
And here we encounter the NIMBY problem. In principle, people may recognise the case for building more houses, but this doesn’t mean they wish to see new houses built in their town or village, let alone on adjoining green land. While this is an arguably selfish reaction, people often respond that new developments will fray over-stretched local public services, spoil the local environment, and destroy the character of their community.
Politics is about building alliances and changing minds. To tackle the problems of NIMBYism, the benefits of new housebuilding must be localised, democratised, and shared across communities in the following steps.
1: Capture value. As Labour’s recent green paper on housing noted, government should work with local authorities to enable them to buy land at a price closer to its existing use value, rather than the windfall values that are assigned once permission to build has been granted.
2: Build better, denser cities. The most attractive, walkable and popular parts of many cities are in the historic centre – think Edinburgh’s Old Town or Bath’s Royal Crescent – with many more homes per acre than in outer suburbs. The simplest way of building up city centres is by allowing residents to add new floors or extend existing properties. Higher housing density makes sense so long as it is coupled with good design codes, green space, adequate funding and municipal infrastructure to ensure that places are liveable. We should permit residents to democratically set their own design codes and determine planning permission to extend and modify properties.
3: Build more affordable housing on the green belt. Parishes generally have no right to amend their own green belts and can only allow very limited development on them. Together with other neighbourhood planning areas, they should be allowed to approve building on green belt land if they are satisfied landowners will provide high-quality homes that local people can afford, and adequate funding for the municipal infrastructure that is essential for communities.
Historically, that has been almost impossible. Building on greenbelt land is still subject to the requirement of “openness”, a nebulous stipulation around preserving the countryside’s open character that causes endless court battles and discourages building housing for those who need it most.
4: Enable councils to plan properly. Councils must have the freedom to negotiate with developers and impose real conditions upon them. Shelter has campaigned to fix the current system of ‘viability tests’ that is riddled with loopholes, allowing developers to get out of building affordable housing by saying they overpaid for land. We must give councils the powers to secure development of the standards and specifications they desire.
5: Empower councils with more devolution. As high-street shops close, many city centres are struggling. New student accommodation owned by universities and local institutions has had a transformative effect on some places, but more is needed. City councils and new regional mayors should have greater powers to spend tax revenues on addressing local housing supply and transport infrastructure.
Andrew Hindmoor is a professor of Politics at Sheffield University. John Myers is co-founder of the London YIMBY campaign.