The collapse of housing supply has forced many to breaking point
Alex Hilton is speaking at the launch of our election guide on housing, in Newcastle on Thursday 19 February.
Young people think they’re unlucky that they live in an era when house prices are so expensive. And older people think young people are unlucky too. But it isn’t true.
House prices are expensive for only one reason. Because there is great demand and little supply. The reason why young people aren’t unlucky is because this circumstance is a decision that has been made and supported by successive governments and which, today, no pretender to Downing Street has a plan to resolve.
In the 1940s, 50s, 60s and 70s, the taxpayer spent money building huge stocks of social housing. This meant that demand for private sector housing was reduced, leading to house prices that were pretty consistently 4-6 times earnings all the way into the mid-90s.
But by that time the effects of Thatcher’s reduction in social housebuilding meant that demand in the private sector started growing sharply. Another thing had happened too; job security had become a thing of the past so you didn’t just need a home near a job, you needed a home near multiple jobs in case you were to lose your job.
We not only increased demand by stopping building social housing, but we had crystallised that demand on the thriving jobs economies, creating an empty homes problem where there were insufficient jobs.
The abolition of rent control and secure tenure completed Thatcher’s triple whammy on housing demand. By undermining tenants’ rights to some sense of affordability and security of tenure, she lifted the theoretical returns to landlords. She reinvented residential property as an investment class.
But in doing so the consumer was captured; at first because social housing became more rarely available and later because the “free” market drove up house prices. And as the consumers were captured, the rents landlords could receive went up, further driving up house prices and exacerbating the problem. Prices for residential land are now so high that it hinders the viability of social housebuilding projects such as they are.
So we have a generation of people – defined by their circumstances rather than their age – that are uniquely disadvantaged in our society.
People choose where to live on the basis of three factors; cost, travel time and “niceness”, which covers the conditions of the property, the neighbourhood, proximity to family and friendship networks etc. You can quantify cost and commuting time in this formula but niceness is hard to get a handle on. But we can see the effect of this formula on people’s lives as rising house prices and rents and the shortage of social housing capture the consumer more thoroughly.
If every single year your rents rise faster than your wages, then you have to make compromises on time and “niceness” in order to meet the cost. And as these factors are balanced by each person, then each year they must be compromising on commuting time and conditions in order to meet the rising costs. Furthermore, as rail commuting at peak time can be a significant cost factor in its own right, this further focuses the compromises people must make onto their living conditions.
This is why you see people living in bedsits and houseshares long after they would rather be living independently. This is why landlords get away with poor maintenance of properties. And of course no tenant since the late 80s has had a statutory right to more than 6 months’ security of tenure.
We are making people without capital assets live in poor quality housing and under financial stress. We are condemning their children to regular educational upheaval. And we have no plan to rectify this.
This new “Generation Rent” are starting to become housing campaigners and activists. But I detect a difference between the philosophically driven housing campaigners of the past 30 years and these new activists. Many of them have simply reached breaking point. And while there is no prospect of a party entering government this year with a plan to give these people respite, direct tenant activism will only grow more powerful.
Political parties must decide today whether they want to set themselves against a movement of desperate people or to relieve their desperation.