“Prefabs to solve housing crisis,” screamed a newspaper front page last weekend. Can the shortage of homes in Britain really be so bad that ministers are floating plans to encourage the first new generation of temporary, pre-packed houses since the great reconstruction drive which followed the Second World War?
The UK is in the midst of a housing shortage that numerous credible experts now describe as “chronic” and “acute”. While it’s widely recognized we need 250,000 new homes each year to meet population growth and household formation, house-building hasn’t reached that level since the late 1970s.
During the Thatcher era, as fewer council houses were built, an average of 190,900 new homes were constructed each year. That number steadily dropped under every Prime Minister from John Major onwards, falling to an average of just 123,560 in the David Cameron years.
“We haven’t been building nearly enough since the 1960s, and the total shortfall over the last 20 years has been huge – around 2.3 million homes,” says Professor Paul Cheshire of the London School of Economics, a housing expert who has advised successive governments. “A growing supply gap over the last few years has seen prices become more and more unaffordable and, if we do nothing, it’ll get even worse”.
Back in the early 1990s, low-and middle-income workers needed to save 5pc of their wages for 3 years, on average, to build a deposit for a first-time property. Today, they need 24 years of such savings. That’s why home ownership has dropped sharply, particularly among youngsters. As house prices spiral way ahead of wages, driven not only by a growing supply-demand chasm but also ultra-loose monetary policy, more and more youngsters from relatively affluent families are being priced-out. The emergence of “generation rent” means the political geometry is shifting.
“If prices keep rising, homeownership will fall further and for the Conservative party, with its base in homeownership, that’s disastrous,” says Alex Morton, who was Cameron’s housing expert in the Downing Street policy unit. “Tories want a society where if you work hard and do the right thing you can own your own home and get on, and that’s becoming increasingly difficult”.
More than half of first-time buyers in 2015 had assistance from “the bank of Mum & Dad”, rising to two-thirds in London and the South East. Such realities lay bare an uncomfortable truth – the growing gulf between “property haves” and “property have-nots”. The UK housing market, traditionally a source of social mobility and security for millions, is now fuelling social immobility and resentment.
“I think the new government feels very keenly the need to increase housing supply,” says Morton. “This housing crisis, and the related feeling of unfairness, is the one thing Labour under Jeremy Corbyn could use to claw back into power”.
Sajid Javid, the new Communities Secretary (who grew up above a shop in Rochdale, in a two-bedroom flat with his four brothers), has come out fighting. Last month he used his speech at Conservative conference to accuse the UK’s large house-builders of deliberately restricting supply to boost prices, and therefore profits. The “big developers” have “a stranglehold on supply”, said Javid, and are “sitting on landbanks”, while “delaying build-out”.
The idea of “land-banking” – with the biggest house-builders remaining on go-slow to up their profit on each unit – used to be dismissed as a conspiracy theory. In recent months, that has changed. A quarter of all new homes in the UK are built by the biggest three providers and more than half are provided by the top eight.
There’s increasing evidence, though, that while the planning system remains cumbersome, more and more permissions are now being given. Yet the homes aren’t being made. Internal government figures show that over the last three years, while there’s been a 46,565 rise in building units granted permission, there’s been a 94,257 rise in such units remaining unbuilt – with the entire increase in planning permission being entirely absorbed by increased alleged “land-banking”. That helps explain why, since 2008, the average time lag between a housing unit being granted permission and the home appearing the market, has risen from 21 to 32 months.
Fired by such evidence, the government is set to publish a White Paper on Housing next month, with fines on building delays being touted and developers possibly being charged council tax being on unbuilt units after a certain period. “There will be carrots and sticks,” says Javid.
A year ago, ministers publicly set a target that one million new homes would be built in the UK by 2020 – so 200,000 per year, compared to well below 150,000 now. I ask Paul Cheshire: “Which is greater, Professor – the probability of a million new homes being built by 2020, or the probability of you walking on the moon?”
The reply is instant. “There’s more change, a lot more, that I’ll walk on the moon, waving a magic wand,” he says. “But even a magic wand won’t work, unless we make very radical changes to our system”.
Liam Halligan’s Dispatches – “Britain’s home-building scandal” – is on Channel 4, Monday 7th November, at 8pm