Thursday, 1 March 2018

Why house prices should be the number one concern of a Conservative government

Housing is the largest expenditure item in the household budget. Higher house prices have a disproportionate potential to reduce the standard of living by consuming funds that would otherwise be available to purchase other goods and services. Even more concerning, high house prices, and related high rents, increase relative poverty, as many lower income households may have to forego basic goods and services because of higher housing costs, and may even be forced to seek public housing subsidies.

Worsening housing affordability and its adverse impact on the declining standard of living threaten one of the greatest human advances in history – the democratization of prosperity.
In 1959, 1970 and 1979, Conservative leadership set out the aim of creating a property owning democracy with the private ownership of housing at the heart of that promise. In broad terms, though building, liberalising finance and through right-to-buy, those Conservative leaders - Macmillan, Heath, Thatcher - delivered on that promise.

Today that promise needs renewing. The answer to the housing pain of younger people doesn't lie in rent controls, council housing or build-to-rent, the answer lies in setting out how ordinary working families can buy a house. We've made some progress though protecting right-to-buy (although failing to extend it to the wider social sector is a disappointment), reducing stamp duty and Help to Buy. But these instruments don't change the fundamentals for too many people in London, houses are too expensive to buy. This expensiveness is a function of land prices not the cost of building a house and the way to reduce land prices is to make more land available for housing in places where people can live and work (or commute to their work).

In the short term (getting that land supply up isn't an overnight task) a Conservative government should also abolish stamp duty for first time buyers, reform green belt regulation to allow small scale building on brownfield sites, support approaches aimed at reducing build costs, develop more flexible shared equity schemes, finish the job of reforming leasehold and give tenants first refusal (with a RTB discount) when landlords sell property. Other thoughts might include tenant ownership of social housing, reforming conveyancing, longer tenancies in the private sector, and a ringfenced 50% levy on land sales with value increases consequential on housing allocations (at least so long as that value is in the gift of the planning system).

It may be a step too far to simply abolish the green belt but we need to review its size and purpose. Simply opposing 'sprawl' because sprawl is bad can't be justified in an age of electric autonomous vehicles, improved mass transit and home working. Suburbia is socially beneficial and, if transport changes happen as we expect, will be less of an environmental concern. The economic case for densification - based on agglomeration as a driver of growth - needs challenging both because it is socially damaging but also because that economic case is based on removing the brightest from elsewhere and piling them up in the big city to produce.

If we do these things, the main reason for young (and not-so-young) people's angst - not having a real, tangible stake in society - is removed and we once again deliver on the idea of a property-owning democracy that has been at the heart of British conservatism for 60 years.



Turnbull2000 said...

"We've made some progress though... Help to Buy"

Simon, Help to Buy was a policy designed to boost house prices, especially that of new build. Yes it helped those who got in on the scheme early, but at the long term cost of sustaining prices even higher than they otherwise would be.

The only concern of the Conservatives is preventing housing from becoming cheaper. They just won't admit so. And it's primarily credit, lower rates, longer term mortgages and inheritances that are driving prices upwards, not a supply shortage. And I guarantee nothing will be done about these either.

Shiney said...

I'd say you ought to read this

Demetrius said...

Two points. There are not so many "ordinary working families" around today as in the past. Also, many of those in work are now on contracts etc. there are far fewer in tenured long term "jobs for a lifetime".