The government needs to show political courage in its forthcoming housing strategy - or reap the social consequences
The debt burden
For a long time the state has chosen to steer clear of Britain’s housing market. As headline writers obsessed over tiny fluctuations in property prices, Westminster sat back and watched housing costs soar. Many people benefitted hugely as a result.
But politicians have been getting hot under the collar more than usual lately, amid reports of falling homeownership and the rising age of the first-time buyers.
Later this month the government will publish its housing strategy. If this is to fulfil the promise of a housing ‘revolution’, it must contain bold and radical policies that address our housing market’s structural problems.
First, government needs to decide what role it wants the housing market to play and whether such a volatile market, largely fuelled by debt, should be relied upon as the principal form of asset-based welfare.
If we saw homes more simply as a place to live, and drastically improved standards and stability in the rented sector, then changing tenure patterns might not be viewed so negatively.
It must also look at the role of housing in the economy. The prime minister has argued that the housing crisis is an effect of the recession; others would call the expansion of cheap credit and subsequent property boom part of the cause. The UK has one of the highest mortgage debt to gross domestic product ratios of advanced economies.
Should society be investing so much into bricks and mortar rather than other forms of more productive investment?
Establishing these principles would help politicians to crystallise their aspirations for house prices. If it is purely a surge in homeowners that politicians want, they might consider relaxing regulations and letting the credit taps flow, an action that would be self-defeating and highly risky, ultimately pushing up prices.
A stable, sustainable housing market should instead be underpinned by a sensibly regulated mortgage market that serves consumers and minimises risks. Offered a choice between cheap credit and cheap housing, surely the latter is more desirable?
Dysfunction in the housing market could also be tackled by rethinking taxation. High housing wealth is largely untaxed, creating distortions and disparity with other types of investments. Better property taxes could create revenue to allow redistribution towards the ‘squeezed middle’ and beyond, harmonise tenure choices and lessen volatility.
It is also fundamental that the unbalanced supply/demand ratio is addressed. We need long-term investment into building good quality houses in the right places and at prices that are genuinely affordable.
Real reform of the housing market requires tough choices and political courage. But the alternatives cannot appeal to any party: the anger of a generation locked out of the housing market, the social consequences of families unable to access a roof over their head, and the financial costs of subsidising unaffordable homes.
Toby Lloyd is director of policy at Shelter