Houses in Britain are perfectly affordable. They’re bought and sold all the time.
Official figures show 114,180 changed hands in August alone. Over 2016 as a whole, 1.2 million homes were acquired.
The problem is that houses are not affordable to the people who we want to be able to buy them, mainly people under the age of 40. As we all know, average house prices have been stretching further and further away from average wages, making it ever harder to get on the housing ladder.
When the baby boomers hit 30, their home ownership rate was around 55 per cent. When people born in the 1970s reached their third decade, around 45 per cent owned their own homes. But for those born in the 1980s, the ownership rate today is just 30 per cent.
If you can’t buy, you generally have to rent. Yet renting is a much more precarious reality for young people than it was in previous decades thanks to a slump in the supply of new social housing, the scrapping of rent regulation and a law change in 1988 allowing private landlords to eject tenants at two months’ notice.
Renting is also more expensive than it was in the past, swallowing up 28 per cent of the incomes of those in their late 20s, up from just 13 per cent of equivalent incomes in the 1980s.
This is our housing crisis: collapsing home ownership rates for those aged below 40 and insecure and expensive renting.
The policy solutions can be loosely labelled: tax, law and supply. First, taxation reform to curb the incentive to view housing as a financial asset, something that has put considerable upward pressure on prices in recent decades. Second, greater rights and security for renters under the law. Third, planning liberalisation to facilitate a greater supply of private homes and bigger government grants for the construction of many more social ones.
This programme should, over time, bring down prices relative to average incomes and also improve life for tenants in the interim.
But the Conservatives have huge problems when it comes to delivering any of this. Significantly more social housebuilding would meet stiff resistance from the dogmatic small state caucus within the party.
Reform of the 1998 Housing Act and new regulatory curbs on rent increases would anger landlords, a category that includes more than a quarter of Conservative MPs.
Taxes on undeveloped land to spur construction rates would be fought by private house-builders, who have been major party donors. Green Belt liberalisation, to remove an obstacle to construction and reduce the price of land for develop, would scandalise the Campaign for the Protection of Rural England and the Conservative-supporting Daily Telegraph. Proper reform of property taxation, making council tax proportionate to house values, would send the wealthy homeowners of the Tory heartlands ballistic.
The Conservatives have finally woken up to the fact they need to make an offer to people under the age of 40 on housing, or see them turn to Labour in ever greater numbers. Yet to do anything serious would also alienate these key Tory support bases. “Their problem is a structural one,” points out the economist Chris Dillow.
This bind is why Theresa May risibly dressed up trivial sums for more social housing last week as some kind of spending splurge. This is why we have another £10bn of taxpayers’ money thrown at Help to Buy, a mortgage subsidy scheme that primarily benefits housebuilders.
Yet the Conservative Party’s problem is even greater than having to upset traditional supporters: there’s an emotional and ideological block.
Housing was central to Thatcherism, from Right to Buy on council homes, to stripping councils of their role in building social housing, to mortgage-interest tax relief, to lifting rent controls, to privileging landlords in the law, right up to the poll tax which abolished the progressive property rates system. It was an ideological project, to create a “property-owning democracy” and to supposedly predispose the electorate to reject “collectivist” policies.
But the failure of this project means we increasingly have the democracy without the property ownership.
And those collectivist policies brandished by Labour look increasingly appealing to the under-40s.
For the Conservatives to do what needs to be done on housing requires them now not only to take on powerful vested interests within their own party but to roll back the original Thatcher revolution on housing. It means coughing up to a series of historic mistakes.