David Cameron’s housing policies are all posturing
ELECTION campaigns are about overselling. But there can be few more egregious examples of a politician claiming, but failing, to get to grips with a problem than a speech given in Colchester on March 2nd by the prime minister, David Cameron, on the subject of housing.
Mr Cameron announced that, if re-elected, his government would build 200,000 cut-price “starter homes” by 2020, which would be offered to first-time buyers under the age of 40 at a 20% discount. Prices would be capped at £450,000 ($690,000) in London and £250,000 outside it. Construction would be funded partly by local authorities lifting obligations on housebuilders to provide affordable homes or to build local infrastructure alongside new houses.
Experts are sceptical. Paul Cheshire of the London School of Economics says he doubts any extra homes will be built. Others have accused Mr Cameron of trying to solve a housing-affordability crisis by attacking affordable housing and offering cheap homes for the middle classes.
About 250,000 new homes are needed every year in England to keep pace with population and household growth. Last year just 119,000 were completed. The years 2010-2014 marked the lowest five years of construction since 1946. Mr Cheshire compares the prime minister’s promises with recent pledges to build garden cities in Bicester (“repackaging something that was happening already”) and Ebbsfleet (“repackaging something that wasn’t happening already”). The Labour Party has criticised Mr Cameron’s plans as “pie in the sky”, but Mr Cheshire points out that Labour’s promise to build 200,000 homes a year by 2020 is equally fanciful. “No party will confront the reality that our system is broken,” he says.
It is broken because the British state has largely got out of the business of building houses, while failing to reform an outdated planning system that has prevented private builders from keeping up with demand. Developers have not filled the gap left when the state drastically reduced its construction of public housing after Margaret Thatcher allowed council tenants to purchase their homes in the 1980s.
The shortage of public housing means many more poor people are obliged to rent privately, and they claim government housing benefit to do so. Almost 40% of such benefits—over £9 billion a year—is thus paid to private landlords, a few of whom are renting out the very council houses they bought in the 1980s. For every £95 the state spends on those benefits, it spends about £5 on subsidising the construction of affordable homes.
By 2019 the housing-benefit bill could be £25 billion, estimates IPPR, a think-tank. With a deficit to attack, the government has responded by cutting the benefit, pinching the poor while not addressing the underlying problems in the market.
Lack of new supply, and the soaring prices this has fuelled, mean that renting is becoming more common among people of all classes. Home-ownership has fallen from a peak of 71% in 2003 to 63%, and from 59% to 36% among 25- to 34-year-olds. For the first time since reliable records began, a higher proportion of Britain’s 23m households own their property outright (33%) than own it with a mortgage (31%).
To compound this lunacy, Mr Cameron also reiterated his opposition to allowing home-building on the huge green belts that surround London and other big cities. He thus encouraged people who might live on the edges of cities to instead live farther away and commute longer distances through areas of scant natural beauty where construction is banned, but where it is fine to build a golf course or a pony paddock. At least the horses will have homes close to the best urban jobs.
This article appeared in the Britain section of the print edition under the headline "Weak foundations"
