Nine problems with the government’s hopeless housing plan

Today the government published its white paper on the housing market, a landmark initiative to address one of the most pressing problems in the UK: the chronic lack of housing, which has seen house prices rise by more than 150% since 2000 and today’s young adults dubbed “generation rent”.

There is some decent content, like targeting inner city sites close to transport hubs for more residential development, relaxing height restrictions and moving carparks underground to make space for new homes, though most of it could easily be achieved by a general relaxation of planning laws. That goes for the pressure that the government is set to put on local councils to come up with plans for more housing as well – a move which smacks of centralisation.

But overall the plan is hopeless. The government does not need to set targets or micro-manage, but get out of the way. Here are nine specific areas where the plan is inadequate or misguided:

  • Generally, planning laws are not set to be liberalised in any significant way. Yes, specific areas are addressed as noted above, but there is no sign of a wholesale war on the red tape which is the most obvious reason for the UK’s housing crisis and which is estimated to be responsible for 35% of the price of the average UK house.
  • The most glaring mistake is that the government won’t touch the Green Belt of un-developed land around major cities other than in “exceptional circumstances”, even though just 1% of it would accommodate up to one million homes – the government’s own target for new homes build by 2020.
  • A central part of the plan is a massive £3bn fund to lend to small firms so they can build houses, in what is apparently an attempt to get more parties involved as around 60% of new homes are today build by 10 large builders. But why this is necessary is unclear, it looks like just another nod to the government’s war on “big business”.
  • The UK’s broken mortgage market is not addressed. It needs massive de-regulation. UK house-buyers need much larger deposits than their peers in many other countries, and the multiple of income which the average person can borrow is today set so low by regulators that for many, especially in London, owning a home is an impossibility.
  • The white paper sets out a desire to “help” older people move out of large houses which are underutilised after the kids have moved out. But the biggest impediment to them downsizing as they get older (apart from a lack of alternatives) is stamp duty, the up to 15% one-off tax on moving, which is not addressed. Ever heard that when you tax something you get less of it? That works for moving house as well. But there is no commitment to stamp duty reform in the white paper.
  • There is a clampdown on “land-banking”, the practice of developers leaving sites untouched with a view to selling off smaller plots over time. But again, the government is treating a symptom without asking the addressing the question of why it is a profitable strategy to just leave land idle?
  • The government is “looking at” compulsory purchasing powers for local authorities – once more a symptom treatment, and a very authoritarian one at that.
  • Rules designed to make developers provide more homes for so-called “affordable rents” is a massive cop-out, making private landlords solve the housing crisis because the government is unwilling to do the hard work and deregulate to allow a functioning market.
  • Incentives to encourage landlords to offer three-year guaranteed tenancies are sure to cause rents to rise and tenants to be vetted much more thoroughly before a landlord will engage with them. Other renter-friendly initiatives include action to ban “sub-standard” properties – a ban on cheap housing – and a consultation on banning the “unfair” fees that are charged by letting agents, which will just shift those costs over to the landlord who will charge the tenant by, again, increasing rent.

All in all, a massive disappointment and an exercise in economic illiteracy – though that is of course entirely as could be expected. This government is no different from all those which preceded it in its lack of courage to grab the problem by the root coupled with a fundamental lack of appreciation of, and belief in, the virtues of a free market.

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