The supply obsession won’t solve the housing crisis

More bloody houses. Image: Getty.

House prices are at record levels. Home ownership languishes near its lowest rate for a generation. And hundreds of thousands of young people can no longer afford to fly the nest.

In response to these three problems, the Chancellor is doling out cash for housing infrastructure. Meanwhile the new housing minister promises to “strain every sinew” to tackle what the Leader of the Commons recently referred to as the UK’s house-building “catastrophe”.

The new government firmly believes that supplying more houses is the route to solving all three aspects of the housing crisis. Unfortunately their diagnosis is faulty. Letting rip with housing supply will do almost nothing to solve any of them, as my new paper for the Collaborative Centre for Housing Evidence today shows.

Prices are undeniably eye-wateringly high. At around eight times average household income, houses are more unaffordable to buy than at almost any point in the past. The government’s last housing white paper summed up the consensus: “The cause is very simple: for too long, we haven’t built enough homes.”

In fact, we have a housing surplus that keeps on growing. Since house prices last hit the bottom in 1996, we’ve added 3.7 million homes in England, while only 3.2 million new households have formed. As a result, the surplus of houses over households grew from 660,000 in 1996 to over 1.1 million by 2018, a trend that is apparent even in London and the South East. Early indications suggest that over the past year we’ve added over 240,000 more homes, while the ONS anticipates that only around 160,000 new households formed.

And it’s not just the numbers of houses that look healthy. Any shortage in supply should show up in declining affordability of private rented sector housing, because rents are determined by the overall supply and demand for places to live.

Yet private rent levels have actually become more affordable for the typical household. Since the late 1990s, average household incomes have risen by around 50 per cent after inflation while, on official data, rents are only up by around 20 per cent. This is the opposite of what we’d expect to see if housing supply had been failing to keep pace.

If we’ve been building enough, how have prices got so high? The answer lies in the fact that it’s not just the supply of and demand for places to live that drives house prices. Mortgage interest rates are the other critical factor. And over the past 20 years, interest rates have collapsed. Back in 1996 you could get a 75 per cent loan-to-value mortgage fixed for two years at around 6.9 per cent. By last year, interest rates on the same product were less than a quarter of that, allowing home buyers to sustain ever larger mortgages to chase spiralling prices up.

While more houses would lower prices, the impact will never be big enough. The results of academic studies consistently suggest that even adding 300,000 houses per year in England over next 20 years would only lower prices by something like 10 per cent. This is nowhere near ambitious enough to reverse the 160 per cent increase in prices we’ve seen since 1996.


Nor will a big supply boost raise home ownership. While high house prices can weigh on home ownership, a much bigger factor is first-time buyer access to mortgages. Home ownership peaked in 2003 at 70.5 per cent and drifted down slightly to 69.1 per cent on the eve of the financial crisis. But the real collapse followed the sudden halving of the number of loans issued to first time buyers after the financial crisis, as banks became more risk averse. The median deposit required jumped from 10 per cent in 2007 to 25 per cent in 2009. Lending to would-be home owners didn’t fully recover until 2016, by which time home ownership had crashed.

For young renters, too, the government’s policy offers very little. Over a million more of them live with their parents today than was the case 15 years ago. The reasons owe nothing to general housing supply. Rather, weak wage growth, the erosion of social housing as an option and deep cuts to housing benefit over the past decade, especially for young people, have made it much harder for them to afford a place of their own, even as affordability on average has improved.

However strained the sinews, the government’s one-size-fits-all approach will not resolve the housing crisis. Until interest rates rise, it’s hard to see how government can reduce house prices without introducing more stringent controls on mortgage lending in general. Meanwhile, it can raise home ownership by either subsidising first-time buyers, directing more lending their way, or reducing financial incentives for landlords. And if it wants to tackle the unaffordability of rented housing for many, particularly in London, it needs to reverse the cuts to housing benefit, build social housing, and get wages growing again.

None of these problems will be solved by building 300,000 houses a year. The sooner we focus on the real causes of our housing woes, the sooner we’ll have a chance of solving the crisis.

Ian Mulheirn is Executive Director at the Tony Blair Institute. His paper on tackling the housing crisis is published by the UK Collaborative Centre for Housing Evidence.

 
 
 
 

Here are my five favourite London council estates

The Dunboyne Road estate. Image: Steve Cadman/Wikimedia Commons.

The author is a Labour member of the London Assembly. In the name of impartiality, CityMetric would like to extend the invitation to write similar columns to representatives of other political parties.

From successful post-war efforts to move families out of slums and into modern homes, to today’s efforts to construct a new generation of social housing, there’s much to be celebrated in London’s precious council housing stock.

This year we celebrate the centenary of the Addison Act, which established a national building programme with government funding for the first time. So here – in no particular order – are my top five London estates:

1. Dunboyne Road

In 1965, the newly established London Borough of Camden was bold and radical when it came to public housing. Their architect’s department boasted 98 staff, led by Sydney Cook. The Grade II listed Dunboyne Road (pictured above) was Britain’s first high-density, low-rise estate. Designed in the late 1960s and completed in 1977, it was the first major work by architect Neave Brown.

Its concrete construction and geometric layout are eye-catchingly modernist, but the 71 flats and maisonettes fit neatly into their surroundings; a reimagining of the classic London street for the 1960s. Each has a private terrace and own entrance onto the central pedestrian walkway and communal gardens, with stepped levels and dual-aspect windows creating light throughout.

Neave Brown himself lived on the estate in the final years of his life remarking, “Who am I to say, but it’s beautiful”.

2. Lilington Gardens

Located just off Vauxhall Bridge Road, the fourteen blocks at Lilington Gardens were built between 1964 and 1972. Between three and eight storeys each, it was again a rejection of the tower blocks which dominated the era, showing that mid-rise housing could provide both beauty and density.

Image: Ewan Munro/Wikimedia Commons.

At a time when Westminster could be proud of the quality of its housing, John Darbourne and Geoffrey Darke won a competition to design the new estate. The result was something special, eschewing modernist forms for something more rugged and layered. The layout allows for secluded green spaces, while the red brick cladding echoes the neighbouring Victorian church of St James the Less. Like all good estates, it included a pub – the Grade II*-listed Pimlico Tram (now The Cask). It was included not as an afterthought, but an integral part of the estate’s design.

3. Ossulston Estate

By the early 1950s, the London County Council’s architect’s department was the biggest in the world, building housing on a huge scale in addition to showp iece projects such as the Southbank Centre.

Though their suburban estates – Downham in Bromley, and Becontree in Barking and Dagenham – were pioneering examples of low-rise of modernity in metroland, these efforts did not always suit the needs of poor city dwellers who weren’t able to move further out. The Ossulton Estate, however, built between 1927 and 1931 on the site of a Somerstown slum and located between Euston and St Pancras stations, did exactly that.

Image: Stephen McKay/Wikimedia Commons.

Chief architect George Topham Forrest’s work was inspired by visits to ‘Red’ Vienna and Ossulston bears distinct similarities to Karl Marx-Hof, which was constructed at the same time. While the roofs and windows have traditional elements, the overall aesthetic is a modernist classic. Like many estates in post-war years, it suffered from neglect and a lack of investment, but following a £6m improvement programme by Camden Council in 2004, the Ossulston is now back to its brilliant best.

4. Alton Estate

Roehampton’s Alton Estate, completed in 1959, was designed by a team led by Rosemary Stjernstedt – the first woman to serve as a senior public sector architect in Britain.

The two parts of the estate – East and West – are the crown jewels of British post-war council housing. Alton West was Le Corbusier in Albion: six ultra-modernist blocks modelled on the Unité d’habitation in Marseille, set among the landscape inherited from the Georgian Mount Clare house. Alton East was a softer, Scandinavian-inspired design of the “new Brutalists” in the LCC.

Image: Stevekeiretsu/Wikimedia Commons.

Rising above the trees to the north east of Richmond Park, the Alton Estate stands testament to the visionary idealism of post-war council housebuilding. On its completion, visitors flocked from across the globe, with American critic G.E. Kidder Smith calling it “probably the finest low-cost housing development in the world”.

Sadly, Alton West however is now at risk from ‘regeneration’ proposals which would see 288 existing homes lost. While council estates should not be fetishised, with investment, improvement and expansion encouraged, any change must be done sensitively and with residents’ backing. I hope that Wandsworth Council and Redrow will follow the mayor’s Good Practice for Estate Regeneration and hold a ballot before plans go ahead, and that if they do, they build on Rosemary Stjernstedt’s legacy.

5. King’s Crescent

When it comes to regeneration Hackney Council have taken an altogether different approach to Wandsworth.

Located on Green Lanes opposite the magnificent Clissold Park, King’s Crescent’s route to a successful and well-supported regeneration project hasn’t always been an easy one. The early 1970s estate was blighted by poor construction, navigability issues and an ill-fated partial demolition in 2000 which turned much of the landscape into hoardings and rubble. But thanks to a step-change in resident engagement and a transformation programme funded by Hackney Council, by 2023 it will be host to 765 new and refurbished homes.

Image: David Holt/Wikimedia Commons.

In the era of government-imposed cuts to local authority budgets, councils have to be pragmatic about funding choices and the new King’s Crescent does include homes for private sale. This is understandably a source of some consternation, but it’s also the source of funding which has made the regeneration possible. Hackney has ensured that more than 50 per cent of the new homes are genuinely affordable, with 97 brand new council homes for social rent.

The new developments have greatly enhanced the area, using both new build and renovation to stitch the estate better into its Victorian surroundings. Existing homes have been retrofitted with balconies, while disused garage space has been repurposed for modern flats. Hackney have clearly thought carefully about character and open spaces, as well as ceiling heights, windows and internal storage.

It is an exceptional project – one of a growing number of new schemes now being spearheaded by ambitious councils across the capital. In 2018-19, the Mayor of London funded the start of 1,916 new council homes – the highest figure since 1984-85.


…what about the Barbican?

On the fiftieth anniversary of its opening, it would be remiss not the mention the Barbican. It’s a brutalist masterpiece and a fantastic feat of post-war planning and design. The location and design are clearly outstanding, but it’s the bright and modern interiors which are truly to die for.

So why is it not on the list? Although it was built by the City of London Corporation, not one of the flats was ever available at a social rent. The properties were built to let at market rents to workers in the City, who later found themselves in the fortunate position of being able to snap them up under the Right to Buy – still the fate of far too many of London’s vital social homes.

Tom Copley is a Labour member of the London Assembly.