The secretary of state for housing says home ownership is at the heart of the Conservative project (Prospect's housing report is kindly sponsored by RICS, Sovereign Housing, Atkins and the Building Societies Association)by Jay Elwes / December 12, 2019 / Leave a comment
Back in 2015, Andrew Adonis, the Labour peer, wrote a piece for Prospect on what he termed Britain’s “housing crisis.” Rents, he said, were sky high and there was a gross under-supply of housing. Adonis put the blame for this crisis on “the planning system, the Green Belt, land banking by private developers, financial controls on local authorities, low numbers of houses built relative to available land (low ‘density’ in the jargon), the operation of the ‘right to buy’ scheme… buyers treating London property as gold bars, the absence of a private rented sector managed by institutional investors, and more besides.”
That was four years ago—and when I met the Secretary of State for Housing, Robert Jenrick, I began by asking whether he accepted that such a housing crisis existed. “There’s a huge generational challenge to build more homes,” he conceded. The scale of the challenge is perhaps recognised more concretely in the government’s target of building 300,000 new homes every year by the middle of next decade.
“That’s a big challenge,” said Jenrick, “but one that I want to embrace.” At the heart of it all, he said, is the planning system, which is “out-dated, complex, convoluted and a product of our post-war settlement and in need [of] serious reform.”
“I also want to refocus on home ownership. I believe that’s at the heart of what Conservatives should do in office.” Jenrick is somewhat younger than the average Conservative minister—he is 37 years old—and suggested that this partly inspired his focus on home ownership. It’s true that home ownership has become more of a challenge for young people today. But even so, the idea of the home-owning democracy is a longstanding Conservative leitmotiv with strong Thatcherite overtones. Not quite a new idea then, but perhaps a politically attractive one, especially now that the average house price in England stands at £233,000, while the average wage is £28,677.
“In my lifetime there hasn’t been a period quite like this where the fundamentals of private property are endangered, and I want to ensure that we fight that battle by giving people the most important source of property, which is a home they can call their own.”
One step was the government’s reform of shared ownership, which gives first time buyers the right to purchase part of a property, rather than the whole thing. Again, it’s a model that was created in the Thatcher era, but one that didn’t quite act as a route to home ownership in the way ministers at the time, including Michael Heseltine, who championed the scheme, might have hoped. Jenrick is more optimistic this time round, by targeting the rule changes at lower income people.
But aside from these clever changes to the rules, Jenrick cited his number one objective as building more homes, giving it as the most significant challenge facing the market. But is it? There’s a question about whether or not sheer volume is in fact the root of Britain’s housing problem. For one thing it steps past the matter of the huge number of properties that are currently unused and lie empty. What of these?
And there is a deeper issue, more problematic still, of the attitude that people take towards their homes and towards the idea of ownership. The housing market has become increasingly financialised, so that people regard their house or flat less as a home and more as an asset. This is perhaps understandable, when considering the colossal gains in house prices in recent decades, especially in London and the south east, where values since the crash of 2008 stuttered and then soared. This was due, in part, to monetary policy, as the Bank of England deployed Quantitative Easing—that is flooding the banking market with new money—which had the effect of driving asset values sharply upwards, housing included.
In addition to this, the ensuing eurozone crisis led to huge outflows of capital from the continent, where people sought to evacuate their bank accounts and put their money in a safe haven. Huge amounts of this wealth made its way into the central London property market, which helped to further boost house prices, first in the super-prime zones of central London, and then further out into Zone Two and beyond. Between 2009 and 2017, London house prices increased by close to 100 per cent.
So how can this “financialisation” be unwound? “Fundamentally I see this as a supply side issue,” said Jenrick. “We need to build more properties,” he said, “however, that’s a very long-term battle.”
“Of the existing stock of properties, there is a question [of] how you can rebalance that more in favour of ownership and away from second homes, buy-to-let and so on. I am interested in that and what more we can do there. Theresa May and the Cameron government did quite a lot there, which seems to be bearing some fruit.”
“But my primary focus is how you can secure public support for more homes to be built.” This requires people to see a real benefit for their communities in terms of who will own these properties. Otherwise new local plans will inevitably be opposed. Developments also need a good deal of accompanying infrastructure, and much of this is covered off in so-called “Section 106” payments, where developers are obliged to hand over some of the profit from their deal to cover the cost of local amenities for new inhabitants.
Infrastructure becomes even more important if the project is large scale: new villages, or towns—or even pan-regional developments like the proposed linkage of Oxford, Cambridge and Milton Keynes, “which I’m very excited about,” Jenrick commented.
A further consideration relates to how new housing projects look. “It seems a tide is turning against generic housing estates,” Jenrick said, “towards homes that are really rooted in communities and returning to the basics of good design—homes built on streets, the streets being tree-lined, houses having front doors, a sense of community and neighbourliness.”
“There’s quite a bit government can do in that regard through the planning system, to make sure the new homes that are being built are actually well designed, safe and rooted in a sense of place and identity.”
Jenrick mentioned the 2019 Sterling Prize for architecture, which was awarded to a design for new local authority homes—homes that in many ways match Jenrick’s prescription. “It was very positive that the architectural community seemed to be returning to designs that people enjoy and help people to live connected lives.”
And if Jenrick does get his plans into action and these new homes are built, would this help to bring down house prices? “I would boost affordability,” Jenrick said. But the question that lingers is the speed with which the government intends to make housing more affordable. If we are to say that the answer to the housing issue is one of supply, and if the government manages to hit its target of 300,000 new homes per year, the effect of this increased supply—one assumes—would be that the price of existing homes would decrease. What might the consequences be of that?
“I want to build more homes, and I don’t think that means that individuals’ existing properties need to be devalued. It just means that the market’s going to become more affordable in the long term.”
But before any increase in building work, the planning system needs reform. “We’ve done a few significant steps,” Jenrick said. “Anyone in the country can build up to two extra stories on their property,” he commented, suggesting that this is more in tune with modern life. Moving house is so expensive, Jenrick argued, it’s often more realistic to adapt the current home and stay there, rather than looking for something bigger.
But the central issue when it comes to planning is the system of the Local Plan, where local authorities are obliged to create proposals for local housing developments. Once these have been agreed at a local level, they are then submitted to central government for approval.
“I think it works. I think it takes too long to produce plans. And local councils and communities feel the system is too convoluted and too subject to speculative developments.”
“One of the tasks of this department will be ensuring that councils do make plans in a timely fashion which accurately meet the housing needs of that community,” said Jenrick. Is that because they are not doing so at the moment? “There’s still a large number of communities that don’t have plans in place, some of which haven’t had plans for a very long time. One classic example is York, which hasn’t really had a plan since the Second World War.”
“I will certainly be using the levers at my disposal to push those communities to put in place plans as quickly as possible and not tolerating those councils that prevaricate.”
The problem can come not only from authorities that fail to create plans, he said, but from areas that pursue plans that are unrealistic. “Sadiq Khan in London is the classic example of that,” said Jenrick, “where he is significantly underdelivering on his existing plan, let alone the plan he is drawing up for the future. And that’s not fair, because the burden of new homes is being borne somewhere else.”
Does he intend to use the levers available to force Khan to develop more homes in the capital?
“There will be a process in the months ahead when his plan for London comes forward for us to assess it and to see whether it is sufficiently ambitious, and we can [assess whether it is] actually going to be delivered on.”
“I intend to use the levers we have here to push forward with housing in London.”
But isn’t this all a bit centralised, especially for a Conservative housing minister? The idea that all house-building in the country has to be referred back to the man in Whitehall seems not a little absurd, especially when the trend in Britain is towards greater devolution. Would it not be better to make local authorities more accountable—to just leave them to it? And what about the structure of the industry, which is dominated by a small number of very big companies—is that a concern? “I’d like to see that change,” he said. “One of the objectives of our housing policy… is to diversify the market and create a housing industry with far more players in it. It’s one of the obvious structural flaws in the housing market.”
Reforms to the planning system will examine the role of smaller builders, he said, and also the role of Section 106 money, which can often be prohibitive. He also cited the new ability for developers to purchase a property with the permission to demolish and re-develop already secured. “That gives a smaller builder the confidence to purchase.”
“But it’s not easy. This is a long-standing problem with this industry, which is almost unique to our country when compared to the US or many European countries where the market is much more diverse.”
If these new houses are ever built, then someone is going to have to buy them, and here is perhaps the trickiest issue of all. Houses are currently very expensive and interest rates are extremely low. If the government pushes for hundreds of thousands of new homes each year, then this will mean hundreds of thousands of people will take out large mortgages at the bottom of the interest rate cycle and at a point where the housing market is looking decidedly “frothy.” Does that worry him at all? “There is certainly some evidence that the market has softened,” he said, “especially in London and the south east and that does concern me. I would hope that we are able to secure a Brexit deal—then you’d see a rebound in the market,” said Jenrick, “particularly in the prime market which seems to have suffered most.”
“I’m hopeful that the housing market will pick up significantly, particularly in terms of investment in new developments—if we can secure a Brexit deal.”