Smart strategy: Starmer's focus on housing could pay off, says Freedman. Here the Labour leader visits a development in Southampton. PA Images / Alamy Stock Photo

Labour—homing in on a plan

Keir Starmer’s housebuilding pledges show some welcome ambition, but will they be enough?
June 14, 2023

Despite his impressive lead in the polls, Keir Starmer has struggled to find a defining issue. Labour has plenty of policy but little cut-through. Focus groups draw a blank when asked about its plans. The commentariat regularly complain about the Labour leader’s lack of vision. But he may finally have found an issue that people can get excited about: housing. In the past few weeks Starmer and his team have made a series of announcements aimed at ramping up the supply of new homes, including proposals for building on the green belt and allowing councils to buy agricultural land at lower rates. 

Strategically it’s brilliant. Housing costs are a key issue for large parts of Labour’s base—one that allows for bold pledges without big spending commitments. Housebuilding is a spiky enough theme to get attention, given the power of nimbyism in British politics. It causes mayhem for Labour’s opponents, as the Tories are deeply split on the issue. Every time Rishi Sunak attacks Starmer for his pro-building policies you can hear the wails of frustration from Tory thinktank world. It doesn’t hurt that so many people working in political media are London-based millennials struggling with rent or a hefty mortgage. 

But that doesn’t mean focusing on housing is without risk. While a comfortable majority—of all ages—support more building, even if it brings down house prices, they are less keen on it happening in their local area. That said, the most recent YouGov poll found 51 per cent in favour and 40 per cent opposed to local development, which suggests that the mood is starting to shift. Even among over-65s, who have the least to gain personally as most already own their home outright, just as many support as oppose. 

There are, though, big regional differences. Londoners are, perhaps unsurprisingly, the keenest on new local building, whereas those living in the rest of the south—where new developments are especially prevalent—are net negative. At the moment, Labour has few constituencies to worry about in this region, but an election victory will require the party to take seats in places like Wycombe and Worthing. The recent local elections showed us that anti-development campaigns, at which the Liberal Democrats and Greens excel, remain resonant. 

The real challenges, though, start after an election win. The standard approaches to driving up building, including national targets, are blunt instruments that lead to significant pushback. It’s rhetorically easy to dismiss those objecting to developments as nimbys, and their objections can be hard to credit. But there are reasonable concerns about the quality of developments popping up and the pressure placed on local services. 

Local support for new development that led to real increases in supply would be the ideal, but this would require there to be meaningful and direct economic benefits to residents. Allowing councils to purchase land more cheaply and pass on the benefit to buyers would be a start, but there are bigger questions about how far Labour is prepared to go in devolving economic power to local or mayoral level. Local decisionmakers would be far more willing to accept incomers if they were given the power to levy and keep more taxes, but this may be a non-starter for the next government.

There’s an even bigger problem. Building more houses, in the kind of numbers Labour is talking about, would bring prices down a bit but not much, and possibly not in the places where they’re most expensive. Housing prices have quadrupled in real terms over the past four decades and more than doubled relative to wages, but this dramatic increase has been driven primarily by a very long period of significantly lower interest rates combined with greater access to credit, rather than by a lack of supply (though that hasn’t helped). Moreover, increasing housing density in and around major cities also increases the economic benefits to living in those places and can push up prices, while exacerbating inequality with “left-behind” parts of the country that had hoped they might be levelled up.

The risk to Labour is that it sets sky-high expectations on housing that it cannot meet

Labour’s policies extend beyond building: the party is also promising a new mortgage guarantee scheme for first-time buyers. Just like similar Conservative schemes, this would allow more people access to lending, but it would not reduce the costs of ownership as a proportion of income. To really challenge that, they would have to look at the other side of the equation and engage with the generational inequality between mortgage-free ­boomers with defined benefit pensions, and graduate ­millennials living with an exceptionally high marginal tax rate when student loan repayments are included. For those on lower incomes, they would need to consider the supply of social housing and undo the crackdown on housing benefit.

The risk to Labour is that it sets sky-high expectations on affordability that it cannot meet, even if it is able to achieve the difficult feat of cutting through the thickets of planning regulation and local opposition that make building in Britain so hard. Ultimately they can’t escape from bigger distributional questions of tax and spend. Starmer’s housing policy is welcome big thinking, but it’s only a start. There are lots more gaps to fill in.