Housing

It’s often said that Britain has a housing crisis. But actually, it’s much more of a London housing crisis. Despite notable improvements under the current Government, we are still building 70,000 fewer homes per year than is required by the level of household demand. But when you break those figures down by region, it turns out that 40,000 of those homes are in London. In a new report for the Centre for Policy Studies, 'Homes for Everyone', I analysed up the total cumulative shortfall in housing demand since 2000, region by region. The gap in London is an eye-watering 343,436 homes – more than three times higher than the 95,957 in the South-East, which was the runner-up in terms of housing shortfall.

We could have given them free Spotify subscriptions. Or Just Eat vouchers. Instead, the government’s pitch to Jezza-loving twenty-somethings was a cut in stamp duty for first-time buyers. The levy on buying a home will be abolished completely up to £300,000, and, for the trainee bankers and tech moguls buying in the better parts of London, the first three hundred grand when you are spending half a million will be let off the tax. On the surface, that might seem like a good wheeze. If young people are angry that they can’t get a first foot on the housing ladder, then it will now be a little easier for them. It comes with a cost, however. It takes a housing policy that was already a mess, and achieves the almost unimaginable feat of making it even worse. Take stamp duty.

You're probably sick of hearing that Britain is in the midst of a housing crisis – we've all heard it said so many times. Over the last few months, Theresa May has been focusing on the topic; claiming that our housing market is ‘broken’, promising to take ‘personal charge’ of the problem. ‘We must get back into the business of building the good quality new homes for people who need them most,’ she said yesterday. On the face of it, the latest figures released by the ONS seem positive. They show that housing supply in England saw a net increase of 217,350 last year; a 15% increase on the previous year’s numbers, and the highest figure for ten years.

Two of the biggest unsolved domestic crises in this country are surely social care and housing. Both have creaked from ‘in trouble’ to ‘already in crisis’ without much in the way of serious policy or money from successive governments. Today, ministers turned their attention to both matters, making rather different announcements on how they might deal with them. First up, social care.

Sometimes in life the biggest risk you can take is to play it safe. This is the predicament of Philip Hammond as he approaches the Budget next month. If he adopts a safety-first approach, it will almost certainly go wrong and he’ll be forced into a credibility-draining U-turn, as he was in March. His best hope is to be bold, and to hope this generates enough momentum to carry him over any bumps in the road. The two longest-serving chancellors of recent times have relished the theatrics of Budget Day. Both Gordon Brown and George Osborne loved pulling a rabbit out of the hat at the last minute, wrongfooting the opposition and grabbing the headlines. Hammond isn’t like that.

With the next European Council not scheduled until December, political attention now turns to next month’s Budget. As I say in The Sun this morning, there are signs that the government is getting to the right place on housing. I understand that when Cabinet discussed the Budget this week, a frequent refrain from ministers was the need to be bold on housing. One ally of the Chancellor tells me, ‘Housing will be the big centrepiece of it’. I understand from government sources that the Budget is likely to back both land release and the government directly commissioning houses. This means the government would free up public sector land and then get housebuilders to build thousands of homes on it.

The Conservative Party conference kicked off with news that the government plans to earmark an additional £10 billion for the Help to Buy scheme to support 135,000 home buyers. Theresa May’s extension to David Cameron’s flagship housing policy, which has helped over 320,000 buyers since its launch in 2013, is part of a raft of eye-catching measures to win over voters under 45 who deserted the Conservatives in the last election. With house prices now almost eight times the average income and many struggling to afford a home, housing has become a critical political issue. The increase in cash is a clear attempt to appeal to the young hoping to get on the housing ladder. But is this short-term measure enough to fix the broken housing market?

Housing – and specifically the dearth of reasonably priced housing – is an issue that crops up again and again in the political conversation. Young people are being priced out of the housing market; even where new housing is being built, very little of it could be classed as ‘affordable’. So today’s news that the average house price is now eight times the average wage will, probably come as little surprise. House prices have been increasing exponentially over the last few decades; in 2000, the average house was 3.96 times the average income, and even since 2007 the average house price has increased by 19%. The fact that it isn’t a surprise doesn’t mean that it isn’t something we should be concerned about, however.

Financial crises tend to see asset prices collapsing, making housing more affordable. But it’s been different this time because the authorities in the UK, and elsewhere, countered the crisis with low interest rates and quantitative easing. By slashing the cost of borrowing and flooding the system with liquidity, these policies set out to - and succeeded in - inflating asset prices. So we have seen the UK stock market and housing market rising at roughly the same amount in the last ten years. Taken together with weak wage growth, the result is that housing in the UK (as in many other countries) has become less affordable. So what has been the result of these post-crash policies? How overvalued is UK housing - and how does it compare to house prices elsewhere?

Although it is commonly assumed that faster-than-sound passenger travel died with Concorde, this isn’t quite true: it overlooks the Caledonian Sleeper. With a few whiskies inside you, this is as close as you can get to teleportation. Yes, according to the timetable it takes about eight-and-a-half hours between Perth and London, but as you are asleep for eight of them, this makes for a supersonic speed of 900 miles per conscious hour. Quite simply, if you are asleep, or otherwise productively or pleasurably engaged, travel time isn’t that important. And if you accept this principle, it becomes clear that Google and Tesla’s Elon Musk have missed an opportunity to really innovate with their ideas for self-driving cars.