Tim Collins is Deputy Director, External Affairs of the Home Builders Federation. He writes here in a personal capacity.
Boris Johnson writes about housing in the Telegraph and appears to have lost his touch, if not with reality, with anyone born after 1975.
The thrust of his article is that the Coalition is mistaken for their recent pronouncements on the need for house prices to flatten out for a period over the coming years and that if that were to happen house-building would stop.
First off, I must declare an interest. The pronouncements were made by my old boss, Housing Minister Grant Shapps. They’ve already sparked a reactionary piece in the Daily Mail and now Boris has got involved:
1) “The sad truth is that it is still psychologically essential to the British middle classes to have a sense that our principal asset is gently appreciating in value or at least it will over the long term”
I don’t think that anyone would disagree with that – and if this was the case over the past decade there would be no need to talk about the need for some stagnation. The problem remains that hundreds of thousands of young people (again I declare an interest as one of them) don’t have a “principal asset” and don’t see much likelihood of getting that security any time soon.
2) “There are normally one million housing transactions a year in this country. That is now down to 600,000...”
This is indeed true – and a major reason is a lack of first time buyers. They are crucial to housing transactions across the country but while mortgage availability is nowhere and house prices remain historically high they’re unable to get a foot on the ladder. To buy the average first time buyer property in London one needs a deposit of over £60,000. Across the UK the average is over £37,000. The unspoken fact is that without the first time buyers it will be a lot more difficult to realise the value of “principal assets”; we may not see house prices flat line but instead fall again – and which home-owner would prefer that?
I don’t think that anyone is arguing that house prices should tank – the coalition talked about flatter growth.
It’s true that falling house prices don’t help developers build but that’s certainly not an argument for spiralling prices. What is needed instead is for the cost of building homes to fall. The Coalition Government has also made announcements on their determination to cut the regulatory burden. Current regulation adds £70,000 to the cost of each unit built and meeting all the requirements entailed in obtaining planning permission can cost even more. The previous Labour Government used the house price boom to pay for community services which fuelled a reliance on ever-increasing prices (another interest to declare, I now work for the Home Builders Federation).
Developers who can build homes cheaper can maintain their margins and cutting down on regulation and putting in place a pro-development planning system will increase certainty for builders and investors.
4) “Which is why the best way to help those millions in search of an affordable home is not to try vainly to ensure that the present stock of housing becomes more affordable – i.e. falls in value – but to increase the supply of affordable homes.”
This is confused and inconsistent. If Boris means build more homes then he is spot on, but it will of course see natural house price stabilisation as supply comes up to meet demand (and there is a demand, Lib Dems who still argue that there are millions of empty homes lying around just waiting to be occupied are deluded, there are some and we should tackle them but there aren’t enough). Instead it seems that Boris is arguing for more affordable housing which prompts the question, who is going to build it? Up until the crash developers were forking out for social housing from a cross subsidy of private housing in conjunction with central government funding. Central government funding is about to be removed and home builders aren’t currently in the position to pay for subsidised housing themselves – perhaps Boris is simply distancing himself from those cuts to social housing budgets...
It also leads to a separate argument – who is he appealing to? I and thousands of others who rent privately, earn decent salaries and but can’t afford to buy don’t want support from other tax-payers - only the most vulnerable families should have to access social and affordable housing – we just want the chance to buy a home. Once we’re in that home Boris might find that we’re more likely to vote Tory...entire generations of us.
5) “That is why housing minister Grant Shapps is right to bring forward his new homes bonus, to give communities an incentive to champion new housing”
Boris is right, evening out his previous criticism of the minister, but the incentive is for all housing not just affordable housing – and that’s what is required, more homes of each type.
There has been a steady increase in thinking on housing from within this Coalition, particularly about affordability for first time buyers, helped by books like The Pinch and The Jilted Generation and work done by Policy Exchange. Hundreds of thousands of young people unable to get a foot onto a broken property ladder were grateful to hear that there is at last some recognition of this in government – Boris needs to understand that affordable housing is not the solution; the solution is more housing of every type alongside better access to mortgages.
