Policy changes will worsen the housing crisis

The Big Society project seeks to “give increased power to people to solve problems closer to where they live”. Under the current economic climate, meeting housing needs is increasingly difficult for people and  governments. The need for affordable housing is stark: if the price of chicken had increased as fast as house prices since 1971, we’d be paying close to £50 for a roast dinner.

The Coalition says it wants more affordable homes. They have introduced a series of reforms to localise decisions around new housebuilding, but there are fundamental challenges in this approach. Home-owners make up 70% of adults in the UK: investors in homes as assets that appreciate greatly in conditions where demand is growing faster than supply. This represents a strong disincentive for these individuals to support additional housebuilding. The housing market in its current form cannot both deliver wealth accumulation for existing home owners, and affordable opportunities for all members of society to meet their need for accommodation. Policy changes announced so far will not solve deep-rooted problems in the way British society houses itself: they are more likely to worsen the housing crisis than address it.

For starters: the Housing Minister no longer has a seat in the cabinet, the cuts have been drastic at the Homes and Communities Agency, and reforms to the manifold problems of the social housing sector focus on making tenure more mobile and conditional, but without a Big Society solution to the displacement created by the controversial cut to housing benefits. Under the localism banner, Regional Spatial Strategies (RSS’s), which set house building targets for local authorities in England, have been scrapped. RSS's, albeit cumbersome, unpopular, and drafted by unelected Regional Assemblies, had an ambition to plan for something in the range of 240,000 to 290,000 homes per year for the next 20 years: thought to be sufficient to stabilise affordability at 2007 levels and meet future need and demand. In the last year, 113,000 homes were built in England.

Given our nation's impressive protection of the countryside, getting close to RSS target annual completions involved squeezing out new flats and houses from small slithers of land where policy allowed. Many home owners and bowls clubs cashed in on the housing boom by selling off gardens and pitches. Often unpopular to their neighbours, such developments benefited from qualifying against Local Authority targets that housing development should take place on previously-developed brownfield land. It was, however, hard for Local Authorities to negotiate any contributions from developers to meet growing infrastructure needs: this model of development was aptly described as “town cramming” rather than “town planning”. The Coalition has decided gardens are now to be reclassified as greenfield in the planning system. The popularity of this policy change is not surprising, but this is localism which will serve to choke off potential new housing supply. Vaguely defined Big Society initiatives such as the Right to Build will not compensate; indeed they may serve only refocus the controversy around new housing development.

Developing new homes is a classic problem of collective action: the imposition is felt by those who neighbour development sites; new residents are seen as a burden to local schools, doctors and parks. Labour's Community Infrastructure Levy is set to standardise the contributions made by developers to local services, rather than the agreements currently negotiated under Section 106 of the Planning Act. Planners and developers are anxious for the new government to complete the picture of reforms to the system: very little happens in a policy vacuum. Local Authorities have scrapped plans for 85,000 homes since the election and 29 national bodies have written to Eric Pickles arguing that planning reform needs something more than nods to localism.

Any attempts to seriously engage with the need for new homes faces a number of challenges – not least to make those homes zero carbon by 2016, a pledge introduced by Labour but without a definition of “zero carbon”. House prices in Britain are peculiarly volatile, while housebuilders are peculiarly unresponsive to demand, partly due to the rigid planning system. Support for a housebuilding surge from housebuilders  may in reality be limited: it was always naïve for the Labour government to lead developers towards raising supply to the point of bringing down house prices. In a business model which is essentially about short-term “flipping” of land, with a profit on the process of building a home, housebuilders would be losing money on land they had already bought. As Mark Twain quipped in the late 19^th Century, “Buy land, they're not making it any more”. The house price bubble was really a land price bubble.

There are quick wins: encouraging self-builders and removing barriers which prevent empty homes being occupied. However, the greatest challenge is fundamental: the public is being encouraged to acquire and speculate on an asset, and also – increasingly, under the localism agenda – responsible for regulating the supply of new homes to be created. The answers are not simple: in Ireland and Spain, huge booms in house building did not prevent drastic price bubbles and their housing markets remain debilitated today. House prices are also driven by the availability of credit and expectations of future price growth, which is why we hear estate agents blame the media for the recent fall in house prices. The good news? There's probably never been a better time to try to address fundamental challenges: to build for a bigger society we clearly need a new economy of housing.