Commentary

The politics of housing: the 2015 general election

Successive governments have failed to address the fundamental problem of housing supply. Will a Conservative or Labour government post-2015 do any better? The SMF’s Chief Economist, Nida Broughton, and Research Director, Nigel Keohane, offer analysis of the party election manifestos.

Although over 240,000 net additions are required on average over the next twenty years, new builds have been running in the low 100,000s since the latter part of the last decade. More telling, you have to go back to the 1970s to see housebuilding at the rate we need now. For nearly three decades, the supply of housing – both private and public – has fallen well short of the level needed to match predicted increases in demand.

In part this has stemmed from the demise of housing as a political issue. As the Chart below sets out, political parties used to devote a significant proportion of their manifesto to housing in the early and middle part of the twentieth century. The 1960s was a time of “election auctions” on housing numbers, with each party vying to promise the most number of new homes built. 1966 saw both parties promising to push house building up to 500,000 new homes a year – around four times today’s level. It is striking that since the 1960s, political debate about housing has dropped dramatically.

Chart: Percentage of manifesto dedicated to housing (1918-2015)

Blog-Chart-Nigel-Nida-Housing-Labour-Conservative-Manifesto

Source: Social Market Foundation analysis of Labour and Conservative party manifestos 1918-2015

However, our new analysis of the election manifestos suggests that housing is once more rising up the political agenda – albeit nowhere near its heights of the mid-twentieth century. The rise of housing as a political issue reflects the growing concerns of voters. Currently, polling by Ipsos MORI suggests that housing has risen significantly as an issue of public concern cited as an issue for Britain to 13% – roughly twice where it was in the 2010 general election.

This is good news because housing is a crucial social and economic policy. But equally important is whether the parties are addressing the fundamental problems. Currently, the parties should be addressing two specific issues: first, the over-riding medium- to long-term challenge of increasing housing supply; second the more immediate challenge of helping those who can’t get on the housing ladder build assets and have a suitable alternative to homeownership. Owning a home has become a primary means of building up assets, but many – especially the younger generation – are increasingly locked out.

The Labour Party and housing in the 2015 election

Labour’s manifesto set out a pledge to increase house-building to 200,000 homes a year by 2020. If successful, this would be a substantial jump; in 2014, less than 120,000 homes were built. The last Labour Government built in the region of 140,000 to 150,000 homes a year. Even an increase to 200,000 homes a year would not be sufficient to keep up with growing demand, but it would be a good start.

The big unanswered question is how this growth in house-building would be delivered. Labour is planning to require that the money saved Help to Buy ISAs is invested in building. It is also planning to give local authorities “use it or lose it” powers to push developers to build more quickly once planning permission is granted. The latter in particular may help, forcing developers not to sit on land. But, this may not be enough. Apart from a blip in 1988, the last time we consistently built 200,000 homes or more a year was the 1970s. This was a time of big public sector building: local authorities were responsible for around two fifths of new homes built every year, compared to near-negligible numbers today. The last time the private sector alone consistently built 200,000 or more homes a year was the 1930s, before the introduction of much of today’s planning regulation. The next Labour Government would need some powerful incentive or force to overcome resistance to development.

Labour have some shorter term solutions to the housing squeeze too. They include making the private rented sector more secure through longer tenancies, and improving standards. These could make renting a more attractive proposition when owning a home is out of reach. But, there is little on how to improve the lot of a generation that have lost out on the ability to build up wealth and assets for the future.

The Conservative Party and housing in the 2015 election

The Conservatives today call themselves ‘the party of home ownership’. This feeds through into their ambition to double the number of first-time buyers over the next five years. The Party’s freshest policy is to extend the ‘Right to Buy’ to a large number – as many as 1.3 million – of housing association tenants. This is accompanied by commitments to 200,000 Starter Homes for first time buyers under the age of 40, as well as the continuation of Right to Buy and Help to Buy ISAs.

These policies are all part of a long Conservative tradition of a ‘property-owning democracy’ fashioned first in the 1920s and extended dramatically under the Thatcher governments. They have undoubted policy merit in helping specific sections of society build assets through housing that may otherwise find it difficult or impossible to do. There is something here then for the ‘lost generation’. It is also politically savvy – polling shows that the policy the public rate as the best for making housing more affordable is to: ‘Give some sort of financial assistance to first time buyers’. Boosting supply features much lower down.

But, ultimately, this is part of the dilemma. Focusing on encouraging homeownership may conspire to work against the expansion of supply and affordability. Demand side policies tend to inflate prices; and, expansion of homeownership means growth in the proportion of the population likely to be anti-development.

Directly, on housing supply, the Conservatives also have much lower ambitions than Labour. There is no overall ambition for total supply. The focus on brownfield land also limits significantly the scope for new development. There may be environmental reasons to exploit brownfield land, but there isn’t enough of it to fill the shortage as demand for housing grows.

Conclusions

Two broad conclusions stand out from putting the 2015 election in its historical context. First, we can see some reversion to type: the Conservatives are once more championing homeownership and property owning democracy through new policies. For its part, Labour is returning to concerns over the private rented sector and overall supply that it represented in the second quarter of the twentieth century (although social housing is no longer the primary method of boosting supply that it was for Clement Atlee and his immediate successors).

Second, the difficulties policymakers have in understanding the interconnections in the housing market to other social and economic challenges are as marked as ever. For the Conservatives, the zealous pursuit of homeownership may entrench further the incentives against new housing supply: homeowners are the most resistant group to new housing developments. For the Labour Party, there is little in here to help the younger generation who have missed out on home ownership to find other ways of building up assets for the future.

But, at least we are talking about housing again.

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