Commodity v Utility: The Heart Of The Housing Crisis

Commodity v Utility: The Heart Of The Housing Crisis

House builders have reignited the housing debate with two new reports. First Berkeley Homes' boss Rob Perrins garnered publicity for calling out the PM on the anticipated failure of government to miss a target of 1m new homes by 2020.

Three reasons were given for what everyone acknowledges is a key issue: the low level of housing construction, linked to a lack of available land, the complexity of planning regulations (whilst acknowledging some reform in this area) and the decline in local authority home building.

But both the report and media response were slewed towards the housebuilders' agenda, leading to a selective and I think misleading analysis.

The report majors on the availability of land (but a lengthy BBC news item focused on planning) This seems to me to be putting all your eggs in the one basket. Even sharing space in your basket for the collapse in council house building - without explaining why that has happened - does not mitigate the inaccuracy this creates. Whatever the intention, the inference was one of "Ditch regulation and we can pile it high and sell it cheap."

Then came the Labour-commissioned Redfern report, named after the eponymous head of Taylor Wimpey.

This was a wider analysis and emphasized, rightly, the macroeconomic factors affecting house ownership - but perplexingly at the expense of shorter-term supply issues. "This is a 20 year problem so we need a 20 year solution" was the author's valedictory summary on the BBC's Today programme.

But of course we don't have 20 years to fix the housing crisis (and it is a crisis). And cost seems to be a key and overlooked element in the mix, affecting (and affected by) both supply and demand.

You see, as Churchill said, land is the ultimate natural monopoly. You can't (unless you are clever and Dutch) really create more of it. Can you think of any other finite resource that would be so poorly regulated?

Yes. Poorly regulated. Not just by the myriad of planning regulations highlighted in the Berkeley report but by a system that allows huge developments to be snapped up on a "buy-to-leave" or "gold bricks" basis. A system that defines homes as "affordable" if they cost "only" 80% of the market value (Lol, as they say).

There are two elephants competing for space in this room. One is our preoccupation with the value of property as a crucial component of wealth creation for the post war generation. We need to wean ourselves off that.

The other is rent control. There have been and will be arguments about whether it will kill or cure the private rented sector. It is sometimes spoken of in the same hushed tones a terrible disease. But as part of a reformed regulatory system? There are persistent success stories, and frankly, given the desperate shortage of decent, affordable accommodation the appetite for action is close to insatiable.

And crucially, what have our politicians got to lose by turning their backs on such an idea? Quite a lot as it happens: increasing numbers of constituencies now have a majority of people who rent in them. Voters - including Conservative voters - now back rent control. An idea whose time has surely now come?

There are other reasons why housing must surely rise even higher on our political agenda: Economic arguments consistently demonstrate the returns on each £ invested in housing outstrip other investments significantly.

Amongst other key pieces of an effective response to the housing crisis, articulated by Alex Hilton and others, are a secondary not-for-profit housing market, yes, planning reform, and new minimum standards in construction and lettings (everything from revenge evictions to MP Karen Buck's "Fit For Habitation" Bill that was talked out by Philip Davies.)

Above all, we will never fix the crisis until we stop treating housing as a commodity and start seeing it for what it is - a utility necessary for a healthy economy and population.

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