Duncan Bowie on the housing crisis and how to solve it
The Government has a real problem with housing. Having promised that Labour will build 1.5 million new homes in its assumed five-year term, Starmer, Rayner and Reeves are discovering that unfortunately the housing position in England is getting worse rather than better (Housing in Scotland and Wales is a devolved function). In summary, new building by developers is falling, while the new build programme by councils and housing associations has in effect collapsed.Although the government increased the national housing budget by £500 million to about £5 billion, there is a struggle to spend the money because there are just not enough housing schemes underway. This is little to do with planning. Costs have gone up and there are just not enough construction workers. Meanwhile housing associations are focusing on improving their own stock, including dealing with cladding and fire risk, reluctant to take on new schemes. So we have the absurdity that there are schemes built by developers as “affordable homes” under planning gain agreements with councils, which housing associations won’t take on. At the same time councils are running out of money, with district councils being bankrupted by the rapidly increasing costs of placing homeless households in temporary accommodation, and in some cases putting their own limited plans for new social housing on hold. Yet the population is still growing much faster than projected and the need for new homes, especially social rented homes, gets more urgent.
Focusing on London, for which we have better data, and where the crisis is most acute, homelessness is at an all-time high. Housing 183,000 homeless households in temporary accommodation costs £4m a day. There are nearly 5,000 rough sleepers. 336,000 households are on waiting lists for council housing. London councils face a gap of £700m in their housing revenue accounts over the next five years. Social rented housing starts fell by 92% to only 150 homes in the second half of 2024. This compares with the estimated need for about 31,000 new social rented homes a year, an estimate based on the last study of London’s housing needs, which is now 8 years old. The average London house price is now £673,000, about £200,00 higher than in the rest of South East England, which is the next most expensive region. In 2024, average London rents were £134 per week for council tenants, £150 per week for housing association tenants and £346 per week for private tenants – far higher than in the rest of England. The average age of a first-time buyer in London is now 35. It is now estimated that about 15% of Londoners are living in overcrowded conditions.
The reasons for the long-term collapse are fairly obvious. House-prices have increased faster than incomes, while the social housing stock has fallen by nearly half over the last 40 years, due partly to the sale of council housing and partly due to the demolition of council estates without the homes being replaced. The population of London has increased faster than the total stock of new homes, with new building failing to meet the targets of new homes required. At the same time the number of empty homes, homes only used part of the time and homes used as tourist accommodation, including Airbnb, has increased, so we are not using the housing stock we have efficiently. As council housing and owner occupation has declined, so private renting has doubled, with over a million households. In 2010, the Conservative led government stopped all grant for new social rented homes, with grant only being restored a few years ago, but at a much lower level. The total national housing investment programme, which funds shared ownership as well as social rented homes, is needs to be at least £15 billion a year, of which London needs at least a third.
So as well as increasing grant for social rented housing , and stopping subsidizing home ownership which just inflates house prices, what else can we do? We need to reduce land costs by allowing councils to buy land, compulsorily if necessary, at its existing value, so that landowners and developers don’t profit from “hope value”, the inflated value that comes from a site being granted planning permission for housing. Stop all council house sales, and councils should buy back at a discount sold council homes when vacated by the existing occupant. Councils should take over long term empty homes and second homes and Airbnb should be taxed and ideally banned altogether. No new development with less than 50% sub-market housing or less than 35% social rented housing should be allowed. We need to increase inheritance tax, capital gains tax and income tax on higher earners, and council tax on the most valuable properties, and use this revenue to fund new social rented homes and maintain existing council homes, so we don’t need to push up rents higher and higher. So it’s all quite simple really.