Yahoo Finance Building more homes in London won't solve the country's housing crisis | Jonathan Manns
Theresa May has pledged to take “personal charge” of the government’s housing strategy, announcing new reforms to help fund housing association home-building, while in two weeks’ time, the mayor of London is set to release his draft London plan, increasing the capital’s housing target by 55% to 64,935 new homes a year.
The mayor’s challenge reflects a national one: in the year to March, permission was given for 304,000 homes, but construction began on only 162,000. It’s also a difficult one, since planning authorities don’t build homes, they only permit them.
The responsibility and capability to address England’s housing crisis ultimately sits with the government. But there’s a paradox: it is neither politically nor economically desirable to quickly and significantly increase the number of homes built, particularly in places of highest demand.
Successful electoral campaigns target those with the greatest electoral weight. This derives from two factors: turnout and cohort size. In England, the largest on both counts are the baby boomers. While the young and disenfranchised have an increasingly loud voice, policies tend to deliver a net benefit to those aged 55-75, who are also most likely to be homeowners.
England’s fragile economic growth is underpinned by household expenditure, which accounts for 63% of gross domestic product. This is dependent upon perceived wealth, which is directly correlated with the price of housing. House price growth has left homeowners (particularly in London) feeling richer while renters feel poorer. To undermine that perception of affluence among homeowners would have a significant economic impact.
So there is huge demand for new housing, but little incentive for policymakers to deliver this where greatest demand exists. We need an answer that is politically expedient, economically pragmatic and socially responsible.
The government needs to avoid house price depreciation but stabilise prices in London, where there is highest demand. Affordability is a spatial problem that demands a spatial solution. It must focus attention on areas where the ability to purchase and the cost of doing so are more closely aligned. The mayor’s plan for London could then focus policies on providing genuinely affordable homes for Londoners.
The Midlands engine and northern powerhouse are attracting and retaining investor attention, and elected mayors in Bristol, Birmingham and Manchester, among others, are beginning to flex their muscles. Yet this is as much a reaction to the London market as any proactive national policies. Clearer government leadership would expedite change and provide greater long-term certainty.
Investment and infrastructure decisions are being made but are too often buried within various national plans and strategies. They should be bought to the forefront. Every other country in western Europe has a national spatial plan; England should publish one too. This would make clear how spending and policy decisions are related, supporting regional revival.
The housing paradox is stifling. To solve it, we must take a pragmatic approach that supports England’s regions. That would not be at the expense of London, but we could all be better served by casting a wider net.
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