With young people’s political capital rising after turning out in large numbers to vote for Jeremy Corbyn’s Labour Party, politicians are starting to put more emphasis on housing policy. This was apparent across the major party conferences, as each party tried to woo younger voters with promises to make home ownership a realistic prospect again and to battle the unaffordable rise in rents across the south east.
Unlike ‘crises’ in other areas of policy, the ‘housing crisis’ is relatively easy to diagnose: it is, broadly speaking, a question of supply and demand. The population of the UK, particularly in the south east, has risen at quite a formidable rate. By contrast, the supply of housing has not. Housing that meets the conventional criteria of affordability is in especially short supply as developers focus their efforts on the more profitable high-end of the property market. The supply and demand issues are further complicated by speculation on the property market which also pushes up prices.
While the problem is easy to diagnose, the solution is more elusive – or at least the solution has managed to evade successive Governments.
If an economic problem is driven by a supply and demand mismatch, one would expect policy to focus either on driving up supply or decreasing demand or, additionally in this case, discouraging inflationary speculation. Yet, too often, policies from both the Conservatives and Labour tackle none of the underlying issues and instead seek to mitigate the effects.
Take the Conservative’s Help to Buy scheme for example. The scheme is designed to encourage young people to save towards a new home by putting government money towards the cost of a deposit, making it easier for people who have never owned a home to get on the property ladder. Leaving aside the fact that the policy requires applicants to be able to set aside money towards a deposit in the first place – making it only really suitable for those on a middling (or higher) income – Help to Buy is only extending first time home ownership to a larger number of middle income earners, therefore increasing demand for starter homes which will inevitably push prices up. By seeking to mitigate an effect of the housing crisis – unaffordable deposits –Help to Buy is only benefiting a small number of middle income earners while making starter homes harder to buy for everyone else.
Meanwhile, Labour’s most high profile housing policy announcement was a proposal for rent controls. These controls are almost universally condemned by economists, who argue that they disincentivise developers from building new rental stock, discourage landlords from upgrading or improving existing rental properties, and encourage more landlords to sell their properties. The net effect of all this is a reduction in the quantity and quality of affordable rental property. Ironically, over the long term, the shorter supply of rental properties due to rent controls may even push rents up. As with Help to Buy, those who would likely benefit would be those on a middling income who may well see an increase in the number of homes available to buy. But for those on a low income setting out to rent for the first time, the policy would be a disaster.
Fundamentally, the only solution to the housing crisis is to build more affordable housing to increase supply. In the short term the government either needs to build affordable housing itself or lift the restrictions which prevent Local Authorities from building. Theresa May’s announcement that she would allocate an additional £2bn to fund social housing – enough to build 5,000 new homes a year, less than 5% of the 250,000 extra homes the government’s own white paper believes is necessary to satisfy demand – is a step in the right direction but not nearly enough. The UK’s political parties need to prioritise tackling the causes of the crisis over policies that seek to mitigate the effects, which often prove more a hindrance than a help.