“I think it is the big issue we are facing at the moment,” David Orr tells me. You can practically hear the italics. “People think immigration and the health service are the big issues – but actually, if you want to reduce people’s perception of the impact of immigration, you have to deal with housing.”
Not just immigration, either: for David Orr, chief executive of the National Housing Federation (NHF) umbrella group of social housing bodies – and thus a man with some skin in this particular game – high housing costs are at the root of just about everything. They swallow up household budgets, depressing the economy. They make it hard for businesses to pay the wages required to attract and retain staff. They’re a major drain on Britain’s contested welfare budget, too.
The good news, Orr says, is that we can solve this. “We have talked ourselves into believing this is difficult when it’s not,” he told a meeting at last autumn’s Labour conference. “It’s easy. We know how to build housing, we have the land, and there is a wall of money looking to get into residential property.”
The bad news is that, four months on, with an election looming and manifestos being prepared, almost nothing seems to have happened. I wanted to ask Orr what his solutions were – and why, if they were so obvious, nobody had so far embraced them.
Facts and figures
Orr began our meeting by reeling off a series of depressing numbers, outlining quite how rich you have to be to drag yourself into home ownership these days. A generation ago, the deposit typically required to buy your first home was, in today’s money, about £3,000; now, it’s 10 times that.
Consequently, in the last five years, the share of buyers who received family assistance to buy their first home has doubled, from one third to two-thirds.
“We’ve created an environment where work doesn’t take you out of poverty”
It gets worse. The average household income among first time buyers today is £34,000. The median household income is only £32,000. In other words, Orr says, “We have precluded more than half the population from becoming new owner occupiers.”
Fewer owners means more renters, and in booming cities like London, rents, too, are through the roof. Salaries, unfortunately, aren’t. “The government quite often says that housing benefit is out of control, and they’re right. It is. The public narrative is that it’s out of control because of scroungers and feckless people screwing the state.”
Actually, though, the amount of housing benefit being paid to people who are unemployed has remained pretty much constant over the last five years. The real increase has been in benefits for people who are in work. “There are people who are on above median incomes who are eligible for housing benefit. We’ve created an environment where work doesn’t actually take you out of poverty.”
One might think that a government would look at this situation and conclude that housing costs were too high. One would be wrong. Instead, all talk is of clamping down on an over-generous benefits system.
That almost certainly won’t be enough: the NHF predicts that private sector rents will increase by 40 per cent over the next decade. “We have just had the biggest baby boom since the baby boom generation,” Orr notes. Back then, “we were building 300,000 houses a year or more.” Last year, it was 140,000. “That’s why I was able to buy on an income of £20,000 a year, and why people in their mid-late 20s now can’t do that.”
Most authorities think we need at least 250,000 new homes a year to keep up with demographic change. “I am really anxious about what will happen to the next generation,” Orr adds. “Unless we become properly seized of the importance of dealing with the housing crisis, I don’t think there’ll be an offer for them.”
“The single biggest cut anywhere in the Whitehall budget”
If Orr sounds uncharacteristically hesitant – it’s not a matter of dealing with the crisis yet, just of persuading politicians that this is something they might want to do – that’s because fixing it is going to be a long job. After all, the roots of this crisis stretch back a generation or more.
The housing policy pursued by the Labour government elected in 1997 focused on cleaning up decrepit social housing stock: replacing bathrooms, kitchens, windows and so on, and getting it up to “Decent Homes” standard. “I think it was actually quite a significant achievement by that government, and I’m not sure that they’ve taken sufficient credit for it,” Orr says.
“But,” he continues, “they took their eye off the ball on building.” The expectation was that, with house prices rising so strongly that banks were offering mortgages at 125 per cent of home values, the market would work its magic and the construction industry would step up. It didn’t.
Labour only began pouring cash into new social housing during Gordon Brown’s premiership: initially this was to deal with growing waiting lists; later it became a form of economic stimulus. But in 2010, there came a change of government, and a spending review. “The single biggest cut anywhere in the entire Whitehall budget was the two-thirds cut in capital for housing supply.”
The coalition’s signature housing policy hasn’t been supply-led at all. “Help To Buy” is, in effect, a state subsidy for first time buyers, boosting prices yet further. It’s not clear if this has had a positive impact on supply of new homes, but the signs aren’t good.
“I’m not sure any of them has understood the urgency of it”
So how do we get out of this mess? It’s no good expecting the industry to step up, Orr argues: the major developers consistently say they’re most comfortable building around 130-140,000 a year. “It doesn’t matter how many kicks up the backside they get, their economic success is predicated on collectively building that many houses. So if you want to get to 250,000, don’t ask them. You have to look at the contribution housing associations, local authorities and others can make.”
That, in other words, means the NHF’s members – but Orr denies he’s pitching for public money. “There’s no problem financing housing,” he says. “There’s a wall of institutional investment looking for a home: if we can get the right offer, we can bring the money in.”
Nor is lack of space any barrier. “There is no shortage of land. None, zero, anywhere. There is a significant problem of rationing of land – through the planning system, the green belt, NIMBYism and so on – but that’s all just noise. There is more land in Surrey set aside for golf courses than there is for human population. We don’t have a shortage of land at all.”
What we do have a shortage of is guts. “The first thing we need is some kind of political commitment. Any government was going to get it in the neck for making the decision to build HS2 [the high speed rail line from London to the north] – but once the decision has been made, it happens.”
The same should be true of housing. “This is something that’ll take more than one parliament to do, so you need to get cross party support for it. We have to think about housing in the same way we do as major infrastructure.”
To inspire such courage, the NHF is spearheading the Homes for Britain campaign, working with a range of other housing bodies to keep the crisis visible. “We are all going to be saying the same thing in the run up to the general election,” Orr explains. “If you want our vote you have to commit to ending the housing crisis within a generation, and having a detailed plan for doing it.” The goal, in not so many words, is to make it less scary talk about housing than to try to duck the issue.
Feet to the fire
It’s early days, but success so far looks a long way off, and while the three main parties have all accepted the existence of the crisis, their response has been distinctly tepid. The LibDems are talking high numbers but have said almost nothing about how they’d achieve this. Labour has said it wants to be building 200,000 homes a year by the end of the next parliament: this, Orr says, is “nowhere near ambitious enough”. Meanwhile, the Tories refuse to name a figure at all, and prefer to talk of “tenure policy” (that is, ownership rates) than “housing policy”.
“All three parties will go to the general election expecting to have to talk about housing,” Orr says. “But I’m not sure that any of them has understood the urgency of it.” For their part, UKIP mostly seem to blame foreigners.
At the end of our meeting, I go back to the question I started with: if it’s so easy to fix this mess, why haven’t we done it already? “Some of it’s inertia. Some of it’s the sense that housing is a private good, not something susceptible to government intervention. Some of it’s about protecting your own space: if you’re an owner occupier, your personal advantage is retained by not losing your view and by seeing house prices sustained.”
And some of it, Orr says, is simply hysteria, about protecting green space, whatever the cost – a mania (my word) of the sort typified by the Campaign for the Protection of Rural England. Build six homes in every village in Britain, Orr says, and you would “basically solve the rural housing crisis. You don’t need to concrete over the countryside to do it. I love the countryside, I want it to be protected. But I don’t want our villages to be just be the homes of very old, very wealthy people. I want them to be real, dynamic living places, and if you don’t build the homes for people who grew up there, you’re not going to get that.”
“It’s all part of the same narrative,” he says, getting into his stride again. “Britain’s small, we’re overcrowded, there’s no land, we haven’t got any space. It’s rubbish.”
He catches himself and stops. “I’m beginning to sound like I’m on a platform.” At least somebody is.
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