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Alex Morton: Crisis? What Crisis? Why Andrew Lilico is wrong to say the UK has no shortage of housing

Alex MortonAlex Morton is Senior Research Fellow for Housing & Planning at Policy Exchange.

On Tuesday, Andrew Lilico argued there is no shortage of housing in London and the South East. His evidence was “a surplus of dwellings over households”.  He pleaded “Will everyone stop talking about a housing shortage”.

Now, Andrew is a great guy (and a former colleague).  But on this issue he is dangerously wrong.

We don’t talk enough about the housing crisis. It’s one of the biggest problems facing ordinary working people in Britain today.

It seems very odd to say we don’t have a housing problem.  After all, even after the "crash", house prices remain three times higher than they were in the 1990s, and rents have doubled.

In the Nineties, the average person setting aside 5 per cent of their income each week could save up for a deposit on a house after eight years. Today, it would take the same person 47 years.

The charity Shelter has shown if the price of food had risen as fast as the price of housing has since 1971, the cost of a supermarket chicken would now be £47 and a bog-standard jar of coffee would cost £20. That is why home ownership rates have started to fall for the first time since the First World War. If you believe in a property owning democracy, that’s worrying indeed.

To put the nonsense about "concreting England" into context then in the 1960s we built 360,000 homes a year. Now we build just 100,000. And only 2.4% is "concreted over" and around 10% of England is developed, including all gardens, parks and so on. Contrary to hysterical myth, we aren’t about to run out of space or farmland.

But all these dry statistics don’t really tell the story.  More and more young people have to live with their parents, often putting pressure on family relationships. Working young couples have to delay having families. Parents speak of heartbreak watching their children struggle. Many feel guilty about how little help they could offer – but then most normal parents can’t afford to act as the “Bank of Mum and Dad.”

Why Andrew is very wrong (on this one!)

Andrew presented some figures on the ratio of dwellings to households. We think in a housing shortage that housing becomes much more expensive and the levels of vacant housing (i.e. households above dwellings) fall – and that’s exactly what Andrew’s data shows.

Andrew argues that lower vacancies mean less of a housing crisis. If Andrew’s interpretation of the data is right London has the smallest housing crisis in England. Does anyone really believe that? Is it not that higher prices create both a housing crisis and lower rate of vacancy?

Household data is very flawed in any case.  For example, young people can’t afford to leave home.  So you might have fewer households than you predicted — but actually things have got worse. Imagine the government restricted the supply of new cars, and the price tripled because they were so scarce. Every driver would have a car. But there would be a crisis as there would be lots of people who would like to be drivers too but couldn’t.

In addition, official data misleads. A “dwelling” merely means ‘structurally separate accommodation’. Imagine a street with 10 homes and 20 residents – two people per dwelling. Double the number of residents to 40, and split the 10 homes into 20 maisonettes. We still have two people per dwelling. On paper no change. But the space per person has halved. That’s not just a thought experiment – it is reality. According to the Royal Institute of British architects, Britain's new-build homes are the smallest in Western Europe and many are too small for family life. More and more people are trapped in tiny flats when they need a family home.

Those who point to Ireland and other places to say we are only in the midst of a housing bubble ignore that we have rising rents. Countries with speculative house price bubbles see house prices rise but rents barely increase. Rents rise when real demand rises. Unfortunately, we still have something of a bubble and shortage – such is the dysfunctional system we are struck with.

Some people will admit that there is a big housing problem, but think that cutting immigration will solve it.  Even if immigration was balanced at close to zero we’d still need more homes regardless.  

The biggest driver of the crisis is that many of the older generation live longer in large family homes. The 3 million immigrants of recent years compare to 25 million spare bedrooms. I think it is great my grandparents are still around as I hit 30 but it means more family homes are needed for our generation. When I think about our housing crisis I think first about how my parents moved from a cramped council flat in Birmingham to ownership in Kent in the 1980s. But soaring prices mean that a family in our position today would find it much harder to do that.

We have to make people less afraid of new homes

Many people feel torn about housing. They see their children and other people’s children struggle. But they are scared. They see unattractive housing being pushed through with limited consultation. They see inadequate infrastructure planning with new development.

We can’t solve the housing crisis by forcing through lots of ugly, high-density housing.

We need to build better quality housing. It’s fashionable among parts (though not all) of the planning community to sneer at traditional housing. And developers pretend they are building high quality homes. Polls show most people want attractive traditional homes – but they feel we’ve not been getting that. So it’s been good to see our new Planning Minister Nick Boles standing up against ugly housing. Now we need the policies to match.

We must make sure those most affected by development have quality control and are properly compensated when there is development nearby.  People want to choose what new homes look like and what they get for their community in return for allowing new housing — not be dictated to. We need to take a serious look at self-build. The Government needs to do a lot more.

Mass emigration or a flourishing society of ‘haves’?

Andrew said there was no housing crisis.  But Ipsos MORI polls show housing is now seen as one of the top 10 issues facing the country — for the first time in years. Labour has a comfortable lead among renters. Many renters assume the Conservatives don’t care about people like them and only look out for those who live in a big home already.

If the UK gives up on its young people – its young people will give up on them. In 2008 the OECD noted that 1.1 million UK born people educated to degree level were living overseas - far more than other countries such as France (370,000), and the USA (410,000). Over 50% of those moving abroad were educated to degree level.

YouGov polling in 2007 found even in the peak of the boom found Londoners aged 25-34, who would have earned high wages but struggled most to afford a family home, were the group most likely to consider leaving, with a third of all people polled considering emigration. Polling for Policy Exchange in 2010 revealed 89% of (well-paid) finance professionals cited the high cost of living as a major reason for leaving the UK. By comparison the 50% rate of tax was cited by just 18%. Young well paid professionals are far more worried about house prices than recent upticks in tax rates.

Getting serious about the housing problem isn’t just essential to win votes and keep the country together. Spreading ownership and helping ordinary people get on is central to Tory philosophy. Mrs Thatcher once had a long argument with Michael Gorbachev.  The Soviet Premier accused her of wanting to create “a society of ‘haves’ and ‘have nots’.”  Mrs T corrected him.  She told him she wanted to build a whole society of ‘haves’.  That should still be the goal today — and solving Britain’s housing problem must be the first step.


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