- United Kingdom: Building Blocks
Successive U.K. governments have collaborated with the private sector to make housing unaffordable for ordinary citizens. Since 2011, U.K. government spending on social housing has fallen by over 60 percent, and rents for newly built affordable homes have risen significantly.
At the same time, policymakers have reduced developers’ obligations to generate affordable housing. Benefits to subsidize escalating private rents for the unemployed, the disabled, and those on low incomes have been cut, and tenant evictions have increased. As a result, the U.K.’s homelessness rate is rising.
Developers, who routinely complain that the planning system is overly restrictive, are actually sitting on a record number of homes with full planning consents waiting to be built.
Instead of facilitating the supply of genuinely affordable accommodations, the government, mindful that rocketing house prices have locked out millions of younger people from homeownership, is offering first time homeowners discounts on new homes. Sadly, these rebates have not only failed to reduce underlying prices, they have bumped up costs for everyone else.
At the top end of the market, foreign investors, including a sizable number of oligarchs and overseas political figures, buy up expensive London properties that become, in effect, safety deposit boxes.
So what’s to be done? The first, most obvious thing to do is to increase public spending on housing so more affordable homes can be built.
Beyond this, local and public authorities that own land fit for housing construction should become equity partners with the private sector on new housing schemes. In this way, local authorities can invest profits back into the development of affordable homes under their own supervision.
In the U.K., local councils face restrictions on raising capital. But these councils should be allowed to raise bonds to finance housing, with rents used to pay back investors.
When it comes to refurbishing old social housing estates, particularly near city centers, the recent trend has been to transfer development rights to private companies, move tenants out, and offer an increasing number of units for private sale. There are many who argue that this amounts to economic and social cleansing.
These damaging policies need to be re-thought to ensure affordable housing numbers in city centers are retained. When a social estate is redeveloped, there should be no loss of affordable homes. [End Page 1]
Rather than building homes, developers sometimes prefer to retain land even when it has planning permission in the hope that prices increase. But if they do so beyond a certain time frame, they should lose their planning consent. Such a policy would encourage swifter construction.
In the U.K., like in most advanced economies, the proportion of a bank’s overall loan book earmarked for mortgage lending has risen dramatically. The scale of mortgage finance has helped create a wall of money that has contributed to the steep increases in housing prices. Likewise, pensions in the U.K. are increasingly reliant on real estate investment.
Banks, pension investors, and the government need to find alternative vehicles beyond property to achieve returns. This will reduce the amount of money chasing a limited supply of bricks and mortar.
NICK MATHIASON is a British journalist with the Bureau of Investigative Journalism. Last year, he was shortlisted for the Orwell Prize for a series of articles on housing.