Labour’s Building Blitz Won’t Fix the Housing Crisis, Experts Say

“Increasing supply is essential to improving affordability,” Angela Rayner said in a recent Commons speech on home-building: “There are simply not enough homes.” Labour’s policy to address the affordability crisis relies heavily on changes to the National Policy Planning Framework (NPPF), the unified UK-wide planning policy, aiming in particular to build 1.5 million new homes in this parliament.

Commentators have broadly praised Labour’s NPPF reforms while questioning the plausibility of achieving this goal through private construction alone. For one thing, it would require almost doubling the current pace of homebuilding, pushing it to levels not seen in 50 years.

Moreover, housing experts who spoke to Novara Media point out that even 1.5m new homes will not move the dial on house prices, rents or homelessness. They probably won’t even keep up with population growth. While Labour’s planning reforms are the biggest step towards addressing the housing crisis in recent memory, these experts agree that they are nevertheless woefully inadequate to the scale of the challenge.

31 years.

The UK is facing its worst housing crisis since the second world war. It has by far the highest rate of homelessness in the developed world (counting those in temporary accommodation as well as rough sleepers), and one in five tenants spends over half of their take-home pay on rent. In London, a typical young person without family wealth would have to save 31 years to save for a deposit – twice as long as in 2003.

One source of trouble is Britain’s discretionary planning system, which makes it relatively hard to build houses, and means the UK has fewer homes per person (about 0.43) than Italy or France (0.59), or the average among the 38 countries within the Organisation for Economic Co-operation and Development (0.49). This is partly why there is widespread – though not unanimous – agreement that tackling the crisis requires building more houses.

Though the Conservative government’s own annual target was 300,000 homes, net house-building has not breached 250,000 in decades, and dipped further after the Tories made local council targets advisory rather than mandatory. The result, Angela Rayner told the Commons, is that “the number of new homes is now likely to drop below 200,000 this year.”

Labour will make the annual target mandatory again, and raise it to 370,000, allowing later years of the parliament to make up for ramping up in earlier ones. It is also introducing measures to improve enforcement, including taking over if local councils fail to update their plans, two-thirds of which are over five years old.

The new government seems to have successfully staved off revolt by strategically rebranding parts of the green belt “grey”, and subjecting homebuilding on it to “golden rules” including offering 50% affordable housing. In practice this will open up a lot of previously out-of-bounds marginal land, not only to housing but also to other commercial developments, unstopping a key bottleneck around urban centres.

Nevertheless, industry insiders seasoned by decades of missed targets are sceptical about whether the 1.5m new homes target is achievable. It will certainly strain Britain’s construction workforce, which has shed workers in recent years, and could cause “double-digit wage inflation”, according to Nobel Francis, economics director at the Construction Products Association (though wage growth is potentially a feature rather than bug, for Labour, provided economy-wide inflation continues to fall). “Medium-term, though, it is not just a cost problem, it is an availability problem,” Francis told industry magazine Building. “There just won’t be the people [to build the houses].”

Moreover, planning permissions granted by councils do not automatically translate into built homes. Developers are already sitting on 49% more land with planning permission than in 2018, enough to last them through 2040 at current building rates. As private property developers “control the supply to maximise their returns”, David Croswaithe, chief economist at BCIS (a building industry consultancy) has argued that “it’s difficult to see how Labour will achieve its ambitious housebuilding targets”.

Public figures, from Green party co-leader Adrian Ramsay to Resolution Foundation chief economist Cara Pacitti, have called on Labour to build far more council houses, and to build them itself. The only sustained period in which Britain constructed 300,000 homes annually was 1950-80, when local authorities built hundreds of thousands of homes; their contribution since has flatlined to near zero. Reeves’s commitment to fiscal austerity makes a big change on this front unlikely.

On the other hand, there are reasons to think Labour may overcome some of these obstacles. Anecdotal evidence from civil servants I’ve talked to suggests this government is laser-focused on delivery in a genuinely novel way, after years of Tory ministers obsessed with media coverage. They have already announced an accelerator task force to look into stalled sites. Having invested considerable political capital into the 1.5m target, they may also avail themselves of some of the many possible incentives to stop builders sitting on land that has planning permission, such as taxing disused land.

McMansions.

Still, even if Labour succeeds at stoking anything near the levels of homebuilding it has promised, it will be years before the increase in supply bears fruit – and any such fruit will be small. Keeping pace with population growth alone would currently require more than 400,000 new homes per year, not counting the backlog of missing houses.

This is why advocates of supply-centric answers to the housing crisis tend to see 300,000 as an undershot, and call for much more radical planning reforms to make faster building possible. One such reform would be moving to a rules-based planning regime, common in Europe, by which conforming applications are automatically accepted.

Not everyone agrees with their analysis. One critique emerging from the environmentally-conscious left argues that supply-centrism fundamentally misreads the present crisis. We already have enough homes, proponents argue, pointing out that the number of individual UK households has actually grown more slowly than housing supply since 1996. Rather than expensive, environmentally damaging homebuilding, we should focus on allocating existing space in a fair and efficient way.

University College London (UCL) economist Stefan Horn underlines the inefficiency and resource-intensiveness of Labour’s trickle-down housing economics. “To make a meaningful dent in affordability we’d need to build a vast amount of houses,” he told Novara Media, “basically blowing our carbon budget on ever larger homes for the wealthy while the homeless still cannot afford a studio.”

One fundamental driver of housing inequality is the desire to consume ever more, larger homes with rising incomes. Richer people spend more on housing (in bigger and second homes) not only in absolute terms but also as a proportion of their income, likely because bigger homes are seen as status symbols as well as reliable investments. This dynamic pulls prices up for everyone, and in the UK has been exacerbated by a period of historically easy credit, a liberalised mortgage market, and cultural attractiveness to foreign buyers, as well as the catastrophically shortsighted help to buy.

Socially rented homes act as a countervailing price anchor, both by directly replacing higher rents, and by offering some people a choice between social and private housing. As societies grow richer, the need for council-owned homes to ensure affordability for those at the bottom of the income distribution grows more acute. Instead of increasing its social housing stock, however, the UK has seen a sustained sell-off at fire-sale prices, enriching one generation of tenants but greatly aggravating the housing crisis for the next. Over 40% of right to buy houses end up on the private rental market at prices far higher than what councils would set.

Discussions of raw supply, in other words, obscure the far greater importance of who owns housing stock, and how effectively the government can target construction to where it is needed most. “The only type of housing that should be built now is full, genuinely affordable social rental housing,” Josh Ryan-Collins, professor of economics at UCL and author of Rethinking the Economics of Land and Housing, told the New Statesman.

As Horn points out, Labour’s 1.5m homes are best understood as oriented towards growth rather than affordability, aiming to stimulate the construction industry at little direct cost to the government. The more important aspects for renters and would-be buyers include changes to section 106, by which councils can require developers to build some affordable housing, to remove the discretion in a system which is widely abused. Research by Shelter has estimated that “viability assessments” cut the provision of affordable homes by four-fifths in 2015-16.

Also welcome is the introduction of a legal obligation for councils to consider the need for social housing in new developments, not just “affordable” housing at 80% of market rates. Last year, only 4,000 new builds were socially rented homes, or less than 2% of the total. Labour’s proposed changes will empower local authorities to get much more out of developers on both these fronts, though they fall far short of what Ryan-Collins has called for.

The government has also signalled potential changes to Right to Buy – an essential step towards rebuilding Britain’s eviscerated stock of social housing and tackling the growing, 1.3 million-strong waiting list for these homes, as well as the scandal of 150,000 homeless children living in temporary accommodation. But it can and should go further.

An immediate problem.

In the short term, renters pushed to the brink by the cost of living crisis will find little direct support in the planning act. “We cannot wait for house building to bring rents down,” Anny Cullum, a policy officer at the tenants’ union Acorn, told Novara Media. She calls for rent stabilisation and control measures, common across Europe, to tackle “high rents eating up more and more of our income, preventing saving and spending, and forcing people to move out of communities.”

Acorn has also called for a commission into housing affordability, modelled on the Welsh example. Labour’s Renter’s Rights bill includes a provision to set up a digital property portal offering information for landlords and tenants, including on landlords’ compliance with their obligations. Acorn argues that it should include rental price data to enable modelling of the most effective ways to stabilise them. It has also demanded in-tenancy rent rises to be limited to inflation or local wage growth, whichever is lower.

If it is genuinely serious about tackling the housing crisis, Labour must also introduce policies to support downsizing, better allocate existing supply and constrain holiday letting to ensure the needs of locals are met first.

Above all, they must greatly restrict or eliminate Right to Buy, and instate further policies to rebuild the stock of government-owned, genuinely affordable social housing, as in Paris and Barcelona, where local councils enjoy a right to first refusal on property sales. Supporting UK councils to buy up homes via cuts to capital gains tax on such purchases could help rapidly build up public stock.

A long-term vision for housing, which Rayner has promised in the coming months, must also account for the UK’s net zero trajectory. Under successive Tory administrations, a major purpose of housing policy has been to turn Labour-voting renters into Tory-voting homeowners. It’s time to articulate and codify a more responsible vision, such as “meeting everyone’s housing needs within planetary boundaries”. There are much faster and more responsible ways of doing this than just building homes.