In this piece, Professor Tony Crook, University of Sheffield, and Professor Christine Whitehead, LSE, suggest ways to improve housing policy, including making more efficient and equitable use of our existing homes, better aligning taxation with housing objectives, and ensuring that policy is integrated and coherent across all agencies.
Housing policy needs a more coherent approach
The housing crisis
Housing rises up the political agenda well before each general election and then falls back as the election approaches. This time the situation may be different given the increased numbers of adults living with their parents; the proportion of those owning their own homes falling from over 70% at its peak to no more than 64% now; and rapidly rising private sector rents across much of the country.
The current crisis is one of the worst in decades. Housing affordability is worsening as incomes stagnate; there is increasingly stark intergenerational inequality between the housing costs and wealth of younger and older generations; and much of our housing is in poor condition and energy inefficient, contributing to the climate crisis.
One fundamental factor of housing markets is that demand adjusts so much more easily than supply, so when demand increases, we get rising prices and market rents rather than more housing – with government policy often adding to this demand pressure. Because access to homeownership is currently so difficult, increasing demand (due more to demographic change than to rising incomes) is being concentrated in the private rented sector and showing up both in rapidly rising rents and in growing homelessness and local authority spending.
Housing policy tends to emphasise numerical targets for building new homes, but these are consistently being missed. Last year (2022-23), 234,000 net additional homes were completed in England, well below the government’s 300,000 target. Moreover, only 63,000 were affordable (social and affordable rents plus shared ownership) – while some estimates suggest we may need up to 145,000 affordable homes per annum to meet growing needs over the next few years.
Three policy proposals for the incoming government
1. Make more efficient and equitable use of our existing homes
New housing, at most, can add around 1% per annum to the existing stock. The vast majority of housing that people will live in over the next decades is already in place. We therefore need to make far better use of what we have, rather than simply concentrating on new builds.
Currently over one third of owner-occupiers are aged over 65 and are generally living (often alone) in relatively large dwellings that are not in the best condition and are hard to heat. Not only is this undesirable from a housing perspective but it also adds to the social care bill.
Numerous retirees would like to move to more suitable homes but need incentives and opportunities. Paying Stamp Duty Land Tax (SDLT) on a new home adds to the costs of moving and is the second most common reason for not moving. We should waive SDLT for over 65s, increasing demand for more appropriate homes and releasing existing larger homes for younger family households. We should also build what people want. In this context, older people have shown they would welcome more housing in the centres of small towns where they would be close to the services they need and support the local economy.
Private renting now accommodates almost one in five of all households, with many more family households staying for longer. This calls for there to be greater security of tenure – which the Government has promised but keeps putting off. There is also a strong case for indexing in-tenancy rent increases rather than each tenant and landlord having to fight their own battles. The Government should also mandate decent housing standards and give local authorities the resources to enforce them.
2. Align taxation better with housing objectives
Currently, council tax is highly regressive, with those in the highest value homes paying proportionately far less council tax than those in lower value homes. Equally local authorities are struggling to meet their responsibilities given existing funding sources. Bringing council tax bands up to date with current values would be far fairer and enable hard-pressed local authorities to raise more funds. This would of course be extremely unpopular but without such changes the poor will continue to pay more; local services will remain under-funded; and there will be no way of making local tax revenues rise in line with prices.
3. Housing policy must be more integrated and coherent across all agencies
When we last built the number of homes we needed (in the 1960s) there was really only one government department involved. Now there are several, as well as the one nominally responsible for housing, i.e. the Department of Levelling Up Homes and Communities. The number of non-government organisations involved in building, owning and financing housing has also multiplied, while macroeconomic policy has become an even more important factor impacting housing policy.
This complexity makes joined-up thinking really important. Instead, much housing policy is incoherent and inconsistent with each intervention appearing to stand alone. For example, DEFRA’s biodiversity and nutrient neutrality objectives are making it almost impossible to build in many areas where there are significant housing shortages. Equally, it is the Department for Work and Pensions (DWP) which determines income related Local Housing Allowances and the system has left many unable to afford their rent.
Inevitably the Treasury and Bank of England are key players and economic stability dominates. So, government housing policy must be as resilient as possible to foreseeable economic and fiscal scenarios. Across government, it is imperative to work towards a more consistent and coherent policy with departments and other organisations jointly committed to core objectives. In this context, we have recently published a Road Map to help a new government plan its housing policies, initially by amending what currently works and then gradually making more fundamental (e.g. taxation) changes.
If this could be accepted by all parties together with an independent oversight body monitoring progress, maybe housing policy could both reflect reality and move forward towards achieving some of the goals currently under discussion in this pre-election period.
About the authors
Professor Tony Crook CBE FAcSS FRTPI is Emeritus Professor of Town & Regional Planning and the former Senior Pro-Vice Chancellor at The University of Sheffield. Over the last four decades, he’s had a large research programme on the supply side of the private rented housing sector and the use of the planning obligations to secure affordable housing infrastructure and capture land value. His work has received research grants of over £3.5m and he has over 250 publications including books, research reports, journal articles and other output.
Professor Christine Whitehead OBE FAcSS HonRTPI is Emeritus Professor of Housing Economics at the London School of Economics and Political Science. Christine is an internationally respected applied economist working mainly in the fields of housing economics, finance and policy. She has worked with a wide range of international agencies as well as regularly for the UK government and Parliament. She was Director of the Cambridge Centre for Housing and Planning Research from 1990 to 2010 as well as Professor at LSE.
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