How George Osborne helped create a housing crisis

The chancellor's response to a deep-seated crisis has been ideological, with further feather-bedding of home ownership

 

The housing crisis in the UK is worsening. The crisis has been created by long-term, low levels of house-building and persistent under-investment. But since 2010, house-building rates have gone lower than the trend of even the last twenty years as the government has withdrawn support for social housing investment while preferring payment of a growing housing benefit bill to the private rented sector.

A lack of supply has seen house prices sky-rocket so that home ownership is beyond almost all young people, except the most affluent. Help from the bank of mum and dad and the government’s range of measures using tax-payers’ money to make access to owner-occupation easier are not enough.

Economist Kate Barker, who undertook the review of UK housing for Gordon Brown in 2004, has warned that 300,000 new homes a year are needed to tackle the housing affordability crisis but that the house-building industry, stymied by planning regulations, land hoarding and skills shortages, would struggle to meet this target.

Barker has also criticised the housing measures outlined in chancellor George Osborne’s autumn statement, which she predicted would make things worse, not better, driving-up prices rather than boosting house-building.

As Barker explained, reported by Observer economics editor Heather Stewart, Osborne’s housing prescriptions are: ‘designed to be supportive of people who are just on the cusp of being able to buy, and need nudging over the edge’.

Housing affordability problems are set to deepen with the average house price now again above the pre-crash peak in 2007. The average house price in September, according to the Land Registry, was £187,000 compared with £182,000 in September 2007.

The chart shows how the basic laws of supply and demand are forcing house prices up. Comparing September 2015 with September 2007, shows that housing sales volumes – supply – were around 100,000 and 80,000 respectively. This points to insufficient new homes for sale coming onto the market and existing home owners not wishing to sell.

chart-house-prices-and-sales-volumes (1)(click to zoom)
This is why George Osborne claimed in his Autumn Statement that he would be supporting the biggest house building programme since the 1970s, and that ‘we are the builders. Yet this is highly unlikely without more than doubling today’s house-building rate for many years to come and without significantly greater bricks and mortar investment in social housing, as campaign group SHOUT has argued.

Osborne’s response to a deep-seated crisis has been ideological, with further feather-bedding of home ownership.

What is needed, though, is a more practical approach that sees all housing sectors building at a faster rate, supported by government, on newly released land, with streamlined planning regulations and training of tens of thousands of bricklayers, carpenters and plumbers.

None of this is achievable in the short-term, so Osborne’s house-building boast will be revealed by the reality of one of the poorest house-building performances since 1945 come the end of the parliament.

Kevin Gulliver is a contributing editor to Left Foot Forward and a director of Birmingham-based research charity the Human City Institute and chair of the Centre for Community Research. He writes in a personal capacity

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