Earlier this week the National Housing Federation released a report which claimed Britain was in the grip of a ‘housing market crisis’, with the proportion of owner-occupiers set to fall as house prices and rents skyrocket. The report appeared to confirm earlier fears about the ability of first-time buyers to enter the property market, and (as I suggested in an earlier post) the possible decline of the property-owning democracy.
The coalition’s Housing Minister, Grant Shapps, responded to the report by pledging to ‘pull out all the stops’ to help first-time buyers, promising that government and construction firms would co-operate to make money available for those unable to put together a deposit.
However, as the NHF report reveals, the problems facing the housing market go much wider than the struggle to get on the property ladder. Low levels of house building – fewer homes were completed in 2010 than in any year since 1923 – combined with an expanding population have left Britain with a major housing shortfall. A virtual freeze on the construction of social housing has also left many local authorities with a severe shortage of council housing. It is not so much that the cost of private housing is too high, more than there are simply not enough houses of any sort.
While the coalition has argued that additional funding and changes to the planning regulations will accelerate the pace of house building, the NHF report makes clear that there will be less land and less money available than would have been the case under Labour plans – plans which would, in any case, have failed to make good the shortfall.
But if current policies will not do the job, Shapps could do worse than to learn the lessons of one of his predecessors as Minister of Housing – Harold Macmillan.
Macmillan was appointed to Housing in the wake of the Conservative triumph in the 1951 general election, at a time when housing commanded far more attention than it does today. Low levels of construction during the interwar years, combined with the impact of German bombing, had left postwar Britain with a shortfall of approximately two million homes and made housing a major political issue. Indeed, the Conservative pledge to build 300,000 homes per year has been perceived as one of the major factors in the Conservative victory in 1951.
Many of the steps Macmillan took mirror those being taken by Shapps – planning rules were relaxed, while many of the controls imposed on the construction industry by the outgoing Labour government were eased or scrapped, as the Conservative government sought to transfer responsibility for house building back to the private sector.
However, Macmillan understood – or at least quickly discovered – that the free market on its own could not make good the shortfall. Growth in private sector construction was very slow (it would not surpass public construction until 1958) and many of the homes built were beyond the means of the working classes. It also failed to provide sufficient housing for private rental, with neither construction companies nor building societies finding the sector an attractive prospect.
Local authorities therefore took on the primary responsibility for construction, supported by funding from central government. While the Conservative government publicly championed the efficiency of a private sector freed from unnecessary controls and planning restrictions, Macmillan found that public provision was the only way to meet his targets. And meet them he certainly did. In 1953, his final full year at the Ministry of Housing, Macmillan was responsible for the construction of 318,000 homes – more than two-thirds of which had been built by the state.
If the coalition wishes to make good the shortfall in the British housing market, then it too may need to think seriously about the state playing a larger role in construction. Like Macmillan, Shapps has initially sought to boost construction by easing the path for the private sector – but, like Macmillan, he may find that this will not be enough to meet the nation’s needs.