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Britain isn’t building houses – and that sends shivers down coalition spines

Downing Street fears unravelling Thatcher’s right-to-buy revolution

It is 60 years since Harold Macmillan became Conservative minister for housing and set about notching up 300,000 houses a year as if they were, in his words, runs in a cricket match. “It is a gamble,” Churchill said as he sent him into bat. “It will make or mar your political career. But every humble home will bless your name if you succeed.” He succeeded a year ahead of schedule.

The prowess of today’s English cricket team is not matched by the current housing tally. The National Housing Federation has produced forecasts perfectly aimed to needle the government pysche, particularly the Tory lobe. It said home ownership will soon slump to levels last seen in the mid-80s before Margaret Thatcher’s right-to-buy policy transformed Britain into a property-owning democracy.

“This is pretty traumatising stuff …” one Downing Street aide said “… to preside over the unravelling of right-to-buy.”

Shivers go down government spines. What strategists on both sides of the coalition – neither of whom performed brilliantly at the last election – are now searching for are policies that yield them the loyalty of a particular group in the way that right-to-buy did for the Tories. Helping people make a home is a sure way to have them bless your name and vote for you.

Downing Street thinks that Ed Miliband’s phrase the “British promise” is clunky but its idea strong: that young people are fearful about what the future holds for them and this is reinforced by the impossibility of getting on the housing ladder. Their parents and grandparents are also fretful about the prospects of their descendants. Rather than wealth cascading down the generations we have anxiety flowing upwards.

A common mea culpa inside No 10 is that they have not yet done well by this demographic and in particular, their housing prospects.

In the housing debate, a double downward spiral comes out of banks not lending. Builders don’t fork out for bricks and materials so housebuilding stops, causing demand and prices to shoot up. At the same time mortgages are disbursed less freely, demand for rented properties increases, so rents rise and thus saving for deposits gets harder.

As one Downing Street aide put it to me: “It was our inability to build houses that led to the last three recessions and there are early signs it could be behind the next one.”

Housing minister Grant Shapps won internal plaudits for manfully defending the portfolio but he also wants more work to be done. In a mark of how seriously ministers are taking this issue, the mid-parliament review by No 10 strategy chief Steve Hilton has concluded that housing is one area where additional legislation might be needed and so they are all working on a coalition housing strategy to be rushed out in November. “The PM, the chancellor and Clegg are all pitching in with ideas,” one Downing Street source says.

Inside government, the debate isn’t really about planning – they hold out great hopes for their reforms, but know they won’t pay off for years to come. In any case, as one government aide points out, housebuilders already have five or six years of approved planning permissions in hand.

And the debate goes beyond the green belt. In the words of one Lib Dem: “In terms of the hierarchy of needs housing demand is above the green belt.” If the number of houses in the UK were doubled tomorrow we would only go from 9% of land being built up to 10.5%.

So within Whitehall the debate is less about planning and where things should be built, and more about getting them built in the first place. For a group of economic liberals, this appears to involve a surprising amount of market intervention and even some market elimination in the form of community land trusts (CLTs).

Shapps is very keen on this one. Last week he sent his parliamentary private secretary Jake Berry to hear the celebration of one seven-year campaign by the London Citizens group which has now reached the point where it can put in a bid for the community to buy St Clement’s hospital in east London and turn it into homes. Shapps has said before he wants an end to housing as a financial nest egg and CLTs effectively do this. As the land value increases, the trust captures its value for the community through a covenant. The land value is separated from the property value with the trust absorbing the cost of the land but also any gains in its value, while families take on the cost of the property. Land is currently 65% of the cost of a London house. When a family moves on they would get some of the uplift in the property but not all.

Berry said their pitch was a “brilliant proposition” and he is supported by some very senior politicians. Yet to the frustration of those in central government, this appears to be a decision for Boris Johnson, and despite public protestations of love for the project, the mayor of London has not yet manned up.

There are some in government who are less keen, fearing CLTs require too much of a subsidy. Nick Clegg has been floating “build now, pay later” schemes. Developers today can pay up front for a tranche of land and then take years to build houses, but the government could hand over land under a contract stipulating that builders pay for it at the point when their first houses go on the market.

The strategy will also include attempts to galvanise the rental market. Hilton has pushed bringing in rent control; others want to encourage housebuilders to build-to-let. The government has already announced some of this but there will be more.

The Resolution Foundation which focuses on squeezed living standards for low to middle earners is doing work for the government, helping to persuade insurance funds to invest their cash in housebuilders who construct modest homes with affordable rents.

“If we don’t plug this problem it says something majorly bad about us,” one person working on the strategy said.

Politicians still believe housing makes or mars a political career. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds